SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
PFS Bancorp, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:______
(2) Aggregate number of securities to which transaction applies:_________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):_______
(4) Proposed maximum aggregate value of transaction:_____________________
(5) Total fee paid:______________________________________________________
[ ] Fee paid previously with preliminary materials:___________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:________________________________________
(2) Form, Schedule or Registration Statement No.:__________________
(3) Filing Party:__________________________________________________
(4) Date Filed:____________________________________________________
[PFS BANCORP, INC. LOGO]
March 25, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of PFS Bancorp, Inc. The meeting will be held at the Company's main office
located at Second and Bridgeway Streets, Aurora, Indiana, on Thursday, April
25, 2002 at 3:00 p.m., Eastern Daylight Savings Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
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, but will
ensure that your vote is counted if you are unable to attend.
On behalf of the Board of Directors and all of the employees of PFS
Bancorp, Inc., I thank you for your continued interest and support.
Sincerely,
/s/ Mel E. Green
Mel E. Green
President and Chief Executive Officer
PFS BANCORP, INC.
Second and Bridgeway Streets
Aurora, Indiana 47001
(812) 926-0631
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 25, 2002
_______________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of PFS Bancorp, Inc. (the "Company") will be held at the main office
of the Company located at Second and Bridgeway Streets, Aurora, Indiana, on
Thursday, April 25, 2002 at 3:00 p.m., Eastern Daylight Savings Time, for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect two directors for a three-year term expiring in 2005, and
until their successors are elected and qualified;
(2) To adopt the PFS Bancorp, Inc. 2002 Stock Option Plan;
(3) To adopt the PFS Bancorp, Inc. 2002 Recognition and Retention Plan
and Trust Agreement;
(4) To ratify the appointment by the Board of Directors of Grant
Thornton LLP as the Company's independent auditors for the fiscal
year ending December 31, 2002; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of
any other such business.
The Board of Directors has fixed March 15, 2002 as the voting record
date for the determination of stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournment thereof. Only those stockholders
of record as of the close of business on that date will be entitled to vote at
the Annual Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mel E. Green
Mel E. Green
President and Chief Executive Officer
Aurora, Indiana
March 25, 2002
_______________________________________________________________________________
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 thereof.
_______________________________________________________________________________
PFS BANCORP, INC.
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF STOCKHOLDERS
April 25, 2002
This Proxy Statement is furnished to holders of common stock, $0.01 par
value per share ("Common Stock"), of PFS Bancorp, Inc. (the "Company"), the
parent holding company of Peoples Federal Savings Bank ("Savings Bank").
Proxies are being solicited on behalf of the Board of Directors of the Company
to be used at the Annual Meeting of Stockholders ("Annual Meeting") to be held
at the Company's main office located at Second and Bridgeway Streets, Aurora,
Indiana, on Thursday, April 25, 2002 at 3:00 p.m., Eastern Daylight Savings
Time, and at any adjournment thereof for the purposes set forth in the Notice
of Annual Meeting of Stockholders. This Proxy Statement is first being mailed
to stockholders on or about March 25, 2002.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the nominees for director described herein,
for approval of the Company's 2002 Stock Option Plan (the "Option Plan"), for
approval of the Company's 2002 Recognition and Retention Plan and Trust
Agreement (the "Recognition Plan"), for ratification of the appointment of
Grant Thornton, LLP for fiscal 2002, 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. Any stockholder giving a proxy
has the power to revoke it at any time before it is exercised by (i) filing
with the Secretary of the Company written notice thereof (Jack D. Tandy,
Corporate Secretary, PFS Bancorp, Inc., Second and Bridgeway Streets, Aurora,
Indiana 47001); (ii) submitting a duly-executed proxy bearing a later date; or
(iii) appearing at the Annual Meeting and giving the Secretary notice of his
or her intention to vote in person. Proxies solicited hereby may be exercised
only at the Annual Meeting and any adjournment thereof and will not be used
for any other meeting.
VOTING
Only stockholders of record at the close of business on March 15, 2002
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 1,551,293 shares of Common Stock issued and
outstanding and the Company had no other class of equity securities
outstanding. Each share of Common Stock is entitled to one vote at the Annual
Meeting on all matters properly presented at the meeting. Directors are
elected by a plurality of the votes cast with a quorum present. The two
persons who receive the greatest number of votes of the holders of Common
Stock represented in person or by proxy at the Annual Meeting will be elected
directors of the Company. The affirmative vote of a majority of the total
votes present in person and by proxy is required for approval of the proposal
to ratify the appointment of the independent auditors. The affirmative vote
of a majority of the total votes eligible to be cast at the Annual Meeting is
required for approval of the proposals to adopt the Option Plan and the
Recognition Plan. Abstentions are considered in determining the presence of a
quorum and will not affect the plurality vote required for the election of
directors. Under rules of the New York Stock Exchange, the proposals to elect
directors, to adopt the Recognition Plan and ratify the appointment of the
independent auditors are considered "discretionary" items upon which brokerage
firms may vote in their discretion on behalf of their clients if such clients
have not furnished voting instructions. Abstentions will have the effect of a
vote against the proposals to adopt the Recognition Plan and to ratify the
appointment of the independent auditors. The proposal to approve the Option
Plan is considered a "non-discretionary" item upon which brokerage firms may
not vote in their discretion on behalf of their clients if such clients have
not furnished voting instructions and for which there may be "broker non-
votes" at the meeting. Because of the required vote, abstentions and broker
non-votes will have the same effect as a vote against the proposal to approve
the Option Plan.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
Election of Directors
The Articles of Incorporation of the Company provide that the Board of
Directors shall be divided into three classes as nearly equal in number as the
then total number of directors constituting the Board of Directors permits.
The directors shall be elected by the stockholders of the Company for
staggered terms, or until their successors are elected and qualified.
At the Annual Meeting, stockholders of the Company will be asked to
elect one class of directors, consisting of two directors, for a three-year
term expiring in 2005, and until their successors are elected and qualified.
No nominee for director is related to any other director or executive
officer of the Company by blood, marriage or adoption, except Messrs. Laker
and Houze who are first cousins. Each nominee currently serves as a director
of the Company and of the Savings Bank.
Unless otherwise directed, each proxy executed and returned by a
stockholder 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 the
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 of the Company and each director whose term continues, including
tenure as a director. All of the below-listed directors also serve as
directors of the Savings Bank. Ages are reflected as of March 15, 2002 and
tenure as director includes service as a director of the Savings Bank.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS EXPIRING IN 2005
Principal Occupation During Director
Name Age the Past Five Years Since
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Mel E. Green 52 Director. President and Chief 2001
Executive Officer of the Company and
the Savings Bank since July 2001.
Previously, Managing Officer and Chief
Executive Officer of the Savings Bank
since May 1993.
Robert L. Laker 71 Director and Chairman of the Board of 1972
the Company and the Savings Bank.
Retired since 1999. Previously,
President of Robert L. Johnston Co.,
Inc., a retail furniture and appliance
store in Aurora, Indiana.
The Board of Directors recommends that you vote FOR election of the nominees
for director.
-2-
DIRECTORS WHOSE TERMS ARE CONTINUING
Directors with a Term Expiring in 2003
Principal Occupation During Director
Name Age the Past Five Years Since
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Gilbert L. Houze 73 Director and Vice Chairman of the 1965
Board. Previously, Managing Officer
and President of the Savings Bank.
Jack D. Tandy 70 Director and Secretary of the 1986
Company. Director and Assistant
Secretary of the Savings Bank.
Previously, Director and Vice
President of the Company and the
Savings Bank; Secretary and
Assistant Secretary of the Company
and the Savings Bank, respectively.
Retired. Previously, owner of
Tandy's Men's Warehouse, a retail
clothing store in Aurora, Indiana.
Directors with a Term Expiring in 2004
Principal Occupation During Director
Name Age the Past Five Years Since
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Dale R. Moeller 65 Director. Insurance agent with the 1987
Moeller Insurance Company, Aurora,
Indiana.
Carl E. Petty 64 Director. Owner and President of 1986
Aurora Lumber Company, Inc., Aurora,
Indiana, a retail lumber and
building materials facility.
Executive Officers Who Are Not Directors
Set forth below is information with respect to the principal occupations
during the last five years for the executive officer of the Company and the
Savings Bank who does not serve as a director. Age is as of March 15, 2002.
Name Age Principal Occupation During the Past Five Years
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Stuart M. Suggs 44 Mr. Suggs currently serves as Vice President
and Chief Financial Officer of the Company and
the Savings Bank. Previously, Mr. Suggs was
Chief Financial Officer of the Savings Bank
since July 1999. Prior thereto, Mr. Suggs was
the Chief Financial Officer of Sycamore
National Bank, Cincinnati, Ohio, from June 1998
through July 1999. Previously, Mr. Suggs was
an Assistant Vice President of Accounting
Systems & Analysis with PNC Bank, Cincinnati,
Ohio, between June 1980 and February 1998.
-3-
Shareholder Nominations
Article III, Section 14 of the Company's Bylaws governs nominations for
election to the Board of Directors, and requires all nominations for election
to the Board other than those made by the Board to be made by a stockholder
eligible to vote at an annual meeting of stockholders who has complied with
the notice provisions in that section. Written notice of a stockholder
nomination must be delivered to, or mailed to and received at, our principal
executive offices not later than 120 days prior to the anniversary date of the
initial mailing of proxy materials by the Company in connection with the
immediately preceding annual meeting of our stockholders, provided that, with
respect to this first Annual Meeting following completion of the conversion,
notice must have been received no later than the close of business on December
31, 2001. The Company did not receive any such nominations.
The Board of Directors or a designated committee thereof may reject any
nomination by a stockholder not made in accordance with the requirements of
Article III, Section 14. Notwithstanding the foregoing, if neither the Board
of Directors nor such committee makes a determination as to the validity of
any nominations by a stockholder, the presiding officer of the annual meeting
shall determine and declare at the annual meeting whether the nomination was
made in accordance with the terms of Article III, Section 14.
Director Nominations; Committees and Meetings of the Board of Directors of the
Company
The Board of Directors of the Company has established an Audit
Committee, and Compensation Committee. Nominations for director of the
Company are made by the full Board of Directors of the Company. During the
fiscal year ended December 31, 2001, the Board of Directors of the Company met
five times. No director of the Company attended fewer than 75 percent of the
aggregate total number of Board meetings and committee meetings on which he
served during this period.
Audit Committee. The primary purpose of the Audit Committee, as set
forth in the committee's charter, is to assist the Board of Directors in
fulfilling its fiduciary responsibilities relating to corporate accounting and
reporting practices. The Audit Committee reviews with management and the
independent auditors the systems of internal control, reviews the annual
financial statements, including the Annual Report on Form 10-KSB and monitors
the Company's adherence in accounting and financial reporting to generally
accepted accounting principles. The Audit Committee is comprised of three
outside directors; and the current members of the Audit Committee are Messrs.
Tandy, Petty and Moeller.
Messrs. Tandy, Petty and Moeller are independent as defined in Rule
4200(a)(15) of the National Association of Securities Dealers, Inc.'s ("NASD")
listing standards. The Audit Committee meets on an as needed basis and met
once in fiscal 2001. On July 12, 2001, the Board of Directors adopted an
Audit Committee Charter in the form attached hereto as Appendix A.
Compensation Committee. The Compensation Committee of the Company
consists of Messrs. Laker, Houze, Moeller, Petty and Tandy. The Compensation
Committee reviews the compensation of the Company's executive officers. The
Compensation Committee met twice during 2001. The report of the Compensation
Committee with respect to compensation for the Chief Executive Officer and all
other executive officers for fiscal 2001 is set forth under "Report of the
Compensation Committee." No member of the Compensation Committee is a current
or former officer or employee of the Company or the Savings Bank.
-4-
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only persons
or entities, including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), who or which
was known to the Company to be the beneficial owner of more than 5% of the
issued and outstanding Common Stock, (ii) the directors of the Company, (iii)
certain executive officers of the Company, and (iv) all directors and
executive officers of the Company as a group.
Common Stock Beneficially Owned as of
March 15, 2002(1)
------------------------------------------------
Name of Beneficial Owner Amount Percentage
- --------------------------------------------------------------------------------------------------------
PFS Bancorp, Inc. Employee Stock Ownership Plan Trust 121,670(2) 7.8%
Second and Bridgeway Streets
Aurora, Indiana 47001
Directors:
Mel E. Green 26,111(2)(3) 1.7
Gilbert L. Houze 15,000 *
Robert L. Laker 25,000(4) 1.6
Dale R. Moeller 10,000 *
Carl E. Petty 25,000 1.6
Jack D. Tandy 25,000(5) 1.6
Executive Officer:
Stuart M. Suggs 991(6) *
All directors and executive officers of 114,602(7) 7.4
the Company as a group (7 persons)
________________
* Represents less than 1% of the outstanding Common Stock.
(1) Based upon filings made pursuant to the 1934 Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the 1934 Act, 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 PFS Bancorp, Inc. Employee Stock Ownership Plan Trust ("Trust") was
established pursuant to the PFS Bancorp, Inc. Employee Stock Ownership
Plan ("ESOP") by an agreement between the Company and Messrs. Green,
Laker and Suggs who act as trustees of the plan ("Trustees"). As of
December 31, 2001, 12,167 shares held in the 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
allocated shares for which employees do not give instructions, 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 Trust.
(Footnotes continue on following page)
-5-
(3) Includes 1,111 shares which have been allocated to Mr. Green's account
in the ESOP.
(4) Includes 15,000 shares held by Mr. Laker's spouse in trust and 10,000
shares in trust for the benefit of Mr. Laker.
(5) Includes 12,500 shares held by Mr. Tandy's spouse in trust and 12,500
shares held in trust for the benefit of Mr. Tandy.
(6) The 991 shares have been allocated to Mr. Suggs' account in the ESOP.
(7) Includes an aggregate of 2,102 shares of Common Stock held in the ESOP.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Company does not pay separate cash compensation to its directors and
officers. The following table sets forth a summary of certain information
concerning the compensation paid by the Savings Bank for services rendered in
all capacities during the years ended December 31, 2001, 2000 and 1999 to the
President and Chief Executive Officer. No executive officers of the Company,
and its subsidiaries, received a total annual salary and bonus during fiscal
2001 in excess of $100,000.
=============================================================================
Annual Compensation (1)
-----------------------
Name and All Other
Principal Position Year Salary (2) Bonus Compensation
- -----------------------------------------------------------------------------
Mel E. Green 2001 $70,354 $2,700 $16,187(2)
President and Chief 2000 66,715 700 972
Executive Officer 1999 65,374 700 991
=============================================================================
______________
(1) Does not include amounts attributable to miscellaneous benefits received
by the named executive officer. In the opinion of management of the
Company, the costs of providing such benefits to the named executive
officer during the years ended December 31, 2001, 2000 and 1999 did not
exceed the lesser of $50,000 or 10% of the total of annual salary and
bonus reported for the individual.
(2) Includes the fair market value of 1,111 shares of Common Stock on
December 31, 2001 ($13.60), allocated to Mr. Green's ESOP account. Also
includes contributions by the Savings Bank to its 401(k) profit sharing
plan to Mr. Green's account which amounted to $1,077 during fiscal 2001.
Compensation of Directors
Each director, except Mr. Green, receives annual fees of $14,400 and
payment of 80% of their health insurance premiums. Messrs. Laker, Houze,
Tandy, Petty and Moeller also receive a fee of $50 for inspecting properties
securing real estate loans made by the Savings Bank due to their extensive
knowledge about local values and trends, averaging an aggregate of $2,000 for
each director per fiscal year. In addition, Messrs. Laker, Houze and Tandy
received a fee of $2,040, $1,440 and $720, respectively, for serving as
Chairman of the Board, Vice Chairman of the Board and Assistant Secretary,
respectively, of the Savings Bank during fiscal 2001. Committee members
receive annual fees of $2,400 regardless of attendance.
-6-
Deferred Compensation Plan
In December 2000, the Savings Bank established an Executive Officers and
Directors Deferred Compensation Plan pursuant to which participants will be
entitled to annual payments of $17,800 for 10 years upon their retirement,
provided they have served as a director or executive officer for at least 10
years. Benefits under the deferred compensation plan will become immediately
vested upon a change-in-control of the Savings Bank. In addition to the
current directors, Mr. Suggs, who is Vice President and Chief Financial
Officer of the Savings Bank, participates in this plan.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is responsible for
establishing management compensation policies and procedures to be reflected
in the Compensation Program offered to the Executive Officers of the Company
and Savings Bank. During the 2001 fiscal year, the members of the Committee
met two times.
The members of the Compensation Committee of both the Company and the
Savings Bank are identical and no member of the Committee is an employee of
the Company or any subsidiary. The Compensation Committee of the Company has
exclusive jurisdiction over the administration and grants relating to all
stock option plans and/or management recognition plans. The Committee uses
outside consultants, market studies and published compensation data as a
resource in establishing a competitive compensation program.
The Committee considers several financial and non-financial
accomplishments in setting the compensation of the Chief Executive Officer and
other executive officers, including but not limited to, net income of the
Savings Bank, efficiency ratios, growth, satisfactory regulatory examinations,
and market value of the Company. The Committee also administers a broad-based
incentive bonus plan which is based on, among other factors, the earnings per
share growth and the return on average equity of the Company.
The Committee has sought to design a compensation program in which a
significant portion of the compensation paid to senior management (including
the Company's President and Chief Executive Officer) be performance driven and
incentive-based. It is through this process that the Company is able to
compete for and retain qualified management personnel who are critical to the
Company's long-term success while aligning the interests of those managers
with the long-term interests of the Company's shareholders.
Gilbert L. Houze Carl E. Petty
Robert L. Laker Jack D. Tandy
Dale R. Moeller
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. The Audit Committee has discussed with
the independent auditors 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 accountants required by Independence Standards Board Standard No.
1, and has discussed with the Company's independent accountant, the
independent accountant's 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 the
Company's Annual Report on Form 10-KSB for fiscal year 2001 for filing with
the SEC.
Dale R. Moeller
Carl E. Petty
Jack D. Tandy
-7-
Compliance with Section 16(a) of the 1934 Act
Section 16(a) of the 1934 Act requires the officers and directors, and
persons who own more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the NASD. Officers, directors and greater than 10% stockholders
are required by regulation to furnish the Company with copies of all Section
16(a) forms they file. The Company knows of no person who owns 10% or more of
the Company's Common Stock.
Based solely on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the
Company believes that during, and with respect to, 2001, the Company's
officers and directors complied in all respects with the reporting
requirements promulgated under Section 16(a) of the 1934 Act.
Indebtedness of Management and Related Party Transactions
In the ordinary course of business, Peoples Federal makes loans
available to its directors, officers and employees. It is the belief of
management that these loans neither involve more than the normal risk of
collectibility nor present other unfavorable features. At December 31, 2001,
the Savings Bank had five loans outstanding to directors and executive
officers of the Savings Bank, or members of their immediate families. All of
such loans, except for two loans to Mr. Green and one loan to Mr. Houze, were
made on substantially the same terms as those prevailing at the time for
comparable transactions to third parties. Pursuant to a program available to
all employees of the Savings Bank, Mr. Green has a mortgage loan and a home
equity line of credit with the Savings Bank and Mr. Houze has a mortgage loan
with the Savings Bank which have discounted rates of interest equal to the
Savings Bank's average cost of funds plus 1% as adjusted every six months. At
December 31, 2001 such loans totaled approximately $100,000 and had an
interest rate of 6.5%.
PROPOSAL TO ADOPT THE 2001 STOCK OPTION PLAN
General
On March 21, 2002, the Board of Directors adopted the 2002 Stock Option
Plan ("Option Plan") which is designed to attract and retain qualified
officers and other employees, provide officers and other employees with a
proprietary interest in the Company as an incentive to contribute to the
success of the Company and reward officers and other employees for outstanding
performance. The Option Plan provides for the grant of incentive stock
options ("incentive stock options") intended to comply with the requirements
of Section 422 of the Internal Revenue Code (the "Code") and non-qualified or
compensatory stock options (the incentive stock options and the non-qualified
(compensatory) options, together, the "options"). Options will be available
for grant to officers, key employees and directors of the Company and any
subsidiary except that non-employee directors will be eligible to receive only
awards of non-qualified stock options. The Board of Directors believes that
the Option Plan is in the best interest of the Company and its stockholders.
If stockholder approval is obtained, options to acquire shares of Common Stock
will be awarded to officers, key employees and directors of the Company and
the Savings Bank with an exercise price equal to the fair market value of the
Common Stock on the date of grant.
Description of the Option Plan
The following description of the Option Plan is a summary of its terms
and is qualified in its entirety by reference to the Option Plan, a copy of
which is attached hereto as Appendix B.
Administration. The Option Plan will be administered and interpreted by
a Committee of the Board of Directors ("Committee") that is comprised solely
of two or more non-employee directors of the Company.
Stock Options. Under the Option Plan, the Board of Directors or the
Committee will determine which officers, key employees and non-employee
directors will be granted options, whether such options will be incentive or
-8-
compensatory options (in the case of options granted to employees), the number
of shares subject to each option, the exercise price of each option and
whether such options may be exercised by delivering other shares of Common
Stock. Under the Plan , the per share exercise price of both an incentive
stock and a compensatory option must at least equal the fair market value of a
share of Common Stock on the date the option is granted (110% of fair market
value in the case of incentive stock options granted to individuals who are
10% stockholders).
The Board or the Committee will specify when options under the Option
Plan will become vested and at what rate they will be exercisable, however, no
options will vest earlier than one year from the date the plans are approved
by stockholders and none shall vest at a rate in excess of 20% per year. The
right to exercise will be cumulative. However, no vesting may occur on or
after a participant's employment or service with the Company is terminated for
any reason other than his death or disability. Unless the Committee or Board
of Directors specifies otherwise at the time an option is granted, all options
granted to participants will become vested and exercisable in full on the date
an optionee terminates his employment or service with the Company or a
subsidiary company because of his death or disability. In addition, all stock
options will become vested and exercisable in full as of the effective date of
his retirement or a change in control of the Company, provided that as of the
date of such retirement or change in control: (i) such treatment is either
authorized or is not prohibited by applicable laws and regulations, or (ii) an
amendment to the Option Plan providing for such treatment has been approved by
the stockholders of the Company at a meeting of stockholders held more than
one year after the consummation of the conversion.
Each stock option or portion thereof will be exercisable at any time on
or after it vests and is exercisable until the earlier of either: (1) ten
years after its date of grant or (2) six months after the date on which the
optionee's employment or service terminates, unless extended by the Committee
or the Board of Directors for a period of up to three years from such
termination. Unless stated otherwise at the time an option is granted, (i) if
an optionee terminates his employment or service with the Company as a result
of disability or retirement without having fully exercised his options, the
optionee will have three years following his termination due to disability or
retirement to exercise such options, and (ii) if an optionee terminates his
employment or service with the Company following a change in control of the
Company without having fully exercised his options, the optionee shall have
the right to exercise such options during the remainder of the original ten
year term of the option. However, failure to exercise incentive stock options
within three months after the date on which the optionee's employment
terminates may result in adverse tax consequences to the optionee. If an
optionee dies while serving as an employee or a non-employee director or
terminates employment or service as a result of disability or retirement and
dies without having fully exercised his options, the optionee's executors,
administrators, legatees or distributees of his estate will have the right to
exercise such options during the one year period following his or her death.
In no event may any option be exercisable more than ten years from the date it
was granted.
Stock options are non-transferable except by will or the laws of descent
and distribution, and during an optionee's lifetime, may be exercisable only
by such optionee or his guardian or legal representative. However, an
optionee who holds non-qualified options may transfer such options to his or
her spouse, lineal ascendants, lineal descendants, or to a duly established
trust for the benefit of one or more of these individuals. Options so
transferred may thereafter be transferred only to the optionee who originally
received the grant or to an individual or trust to whom the optionee could
have initially transferred the option. Options which are so transferred will
be exercisable by the transferee according to the same terms and conditions as
applied to the optionee.
Payment for shares purchased upon the exercise of options may be made
(i) in cash or by check, (ii) by delivery of a properly executed exercise
notice, together with irrevocable instructions to a broker to sell the shares
and then to properly deliver to the Company the amount of sale proceeds to pay
the exercise price, all in accordance with applicable laws and regulations or
(iii) if permitted by the Committee or the Board, by delivering shares of
Common Stock (including shares acquired pursuant to the exercise of an option)
with a fair market value equal to the total option price of the shares being
acquired pursuant to the option, by withholding some of the shares of Common
Stock which are being purchased upon exercise of an option, or any combination
of the foregoing. With respect to subclause (iii) in the preceding sentence,
the shares of Common Stock delivered to pay the purchase price must have
either been (a)
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purchased in open market transactions or (b) issued by the Company pursuant to
a plan thereof, in each case more than six months prior to the exercise date
of the option.
If the fair market value of a share of Common Stock at the time of
exercise is greater than the exercise price per share, this feature would
enable the optionee to acquire a number of shares of Common Stock upon
exercise of the Option, which is greater than the number of shares delivered
as payment for the exercise price. In addition, an optionee can exercise his
or her option in whole or in part and then deliver the shares acquired upon
such exercise (if permitted by the Committee or the Board) as payment for the
exercise price of all or part of his options. Again, if the fair market value
of a share of Common Stock at the time of exercise is greater than the
exercise price per share, this feature would enable the optionee to either (i)
reduce the amount of cash required to receive a fixed number of shares upon
exercise of the option or (ii) receive a greater number of shares upon
exercise of the option for the same amount of cash that would have otherwise
been used. Because options may be exercised in part from time to time, the
ability to deliver Common Stock as payment of the exercise price could enable
the optionee to turn a relatively small number of shares into a large number
of shares.
Number of Shares Covered by the Option Plan. A total of 152,088 shares
of Common Stock has been reserved for future issuance pursuant to the Option
Plan. The Option Plan provides that grants to each employee and each non-
employee director shall not exceed 25% and 5% of the shares of Common Stock
available under the Option Plan, respectively. Awards made to non-employee
directors in the aggregate may not exceed 30% of the number of shares
available under the Option Plan. In the event of a stock split, subdivision,
stock dividend or any other capital adjustment, the number of shares of Common
Stock under the Option Plan, the number of shares to which any Award relates
and the exercise price per share under any option or stock appreciation right
shall be adjusted to reflect such increase or decrease in the total number of
shares of Common Stock outstanding or such capital adjustment.
Amendment and Termination of the Option Plan. Unless sooner terminated,
the Option Plan shall continue in effect for a period of ten years from March
21, 2002 assuming approval of the Option Plan by stockholders. Termination of
the Option Plan shall not affect any previously granted Options.
Federal Income Tax Consequences. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and compensatory
stock options is different. As regards incentive stock options, an optionee
who meets certain holding period requirements will not recognize income at the
time the option is granted or at the time the option is exercised, and a
federal income tax deduction generally will not be available to the Company at
any time as a result of such grant or exercise. With respect to compensatory
stock options, the difference between the fair market value on the date of
exercise and the option exercise price generally will be treated as
compensation income upon exercise, and the Company will be entitled to a
deduction in the amount of income so recognized by the optionee. Upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a deduction
for federal income tax purposes in the same amount.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1.0 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executives"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1.0 million deduction limitation. In order for compensation to
qualify for this exception: (i) it must be paid solely on account of the
attainment of one or more preestablished, objective performance goals; (ii)
the performance goal must be established by a compensation committee
consisting solely of two or more outside directors, as defined; (iii) the
material terms under which the compensation is to be paid, including
performance goals, must be disclosed to, and approved by, stockholders in a
separate vote prior to payment; and (iv) prior to payment, the compensation
committee must certify that the performance goals and any other material terms
were in fact satisfied (the "Certification Requirement").
Treasury regulations provide that compensation attributable to a stock
option is deemed to satisfy the requirement that compensation be paid solely
on account of the attainment of one or more performance goals if: (i) the
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grant is made by a compensation committee consisting solely of two or more
outside directors, as defined; (ii) the plan under which the option or stock
appreciation right is granted states the maximum number of shares with respect
to which options or stock appreciation rights may be granted during a
specified period to any employee; and (iii) under the terms of the option, the
amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of grant. The Certification
Requirement is not necessary if these other requirements are satisfied.
The Option Plan has been designed to meet the requirements of Section
162(m) of the Code and, as a result, the Company believes that compensation
attributable to stock options granted under the 2001 Stock Option Plan in
accordance with the foregoing requirements will be fully deductible under
Section 162(m) of the Code. If the non-excluded compensation of a covered
executive exceeded $1.0 million, however, compensation attributable to other
compensation, may not be fully deductible unless the grant or vesting of such
other compensation is contingent on the attainment of a performance goal
determined by a compensation committee meeting specified requirements and
disclosed to and approved by the stockholders of the Company. The Board of
Directors believes that the likelihood of any impact on the Company from the
deduction limitation contained in Section 162(m) of the Code is remote at this
time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Neither the grant nor the exercise of an
incentive stock option or a non-qualified stock option under the Option Plan
currently requires any charge against earnings under generally accepted
accounting principles. In October 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which is effective for
transactions entered into after December 15, 1995. This Statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This Statement defines a fair value method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. The Company anticipates that it will use the
intrinsic value method, in which event pro forma disclosure will be included
in the footnotes to the Company's financial statements to show what net income
and earnings per share would have been if the fair value method had been
utilized. If the Company elects to utilize the fair value method, its net
income and earnings per share may be adversely affected.
Stockholder Approval. No awards will be granted under the Option Plan
unless the Option Plan is approved by stockholders. Stockholder ratification
of the Option Plan will also satisfy The Nasdaq Stock Market listing and
federal tax requirements.
Awards to be Granted. The Board of Directors of the Company adopted the
Option Plan, and the Committee established thereunder intends to meet after
approval by shareholders to make recommendations to the Board of Directors as
to the specific terms of options, including vesting of options, and the
allocation of awards of options to executive officers, employees and non-
employee directors of the Company and the Savings Bank. At the present time,
no determination has been made as to allocation of grants. The Committee is
also considering awarding options to certain non-executive officers and key
employees of the Savings Bank.
The Board of Directors recommends that stockholders vote FOR adoption of the
2002 Stock Option Plan.
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PROPOSAL TO ADOPT THE 2002 RECOGNITION AND
RETENTION PLAN AND TRUST AGREEMENT
General
The Board of Directors has adopted the Recognition Plan, the objective
of which is to enable the Company to provide officers, key employees and
directors with a proprietary interest in the Company and as an incentive to
contribute to its success. Officers, key employees and directors of the
Company and the Savings Bank who are selected by the board of directors of the
Company or members of a committee appointed by the board will be eligible to
receive benefits under the Recognition Plan. If stockholder approval is
obtained, shares will be granted to officers, key employees and directors as
determined by the committee or the board of directors.
Description of the Recognition Plan
The following description of the Recognition Plan is a summary of its
terms and is qualified in its entirety by reference to the Recognition Plan, a
copy of which is attached hereto as Appendix C.
Administration. A committee of the Board of Directors of the Company
will administer the Recognition Plan, which shall consist of two or more
members of the Board, each of whom shall be a non-employee director of the
Company. The members of the committee will initially consist of Messrs.
Laker, Houze, Moeller, Petty and Tandy. Messrs. Laker, Houze, Moeller and
Petty will also serve as initial trustees of the trust established pursuant to
the Recognition Plan ("Trust"). The trustees will have the responsibility to
invest all funds contributed by the Company to the Trust.
Upon stockholder approval of the Recognition Plan, the Company will
contribute sufficient funds to the Trust so that the Trust can purchase a
number of shares of Common Stock equal to 4% of the common stock outstanding,
or 60,835 shares. It is currently anticipated that these shares will be
acquired through open market purchases to the extent available, although the
Company reserves the right to issue previously unissued shares or treasury
shares to the Recognition Plan. The issuance of new shares by the Company
would be dilutive to the voting rights of existing stockholders and to the
Company's book value per share and earnings per share.
Grants. Shares of common stock granted pursuant to the Recognition Plan
will be in the form of restricted stock payable over a five-year period at a
rate of 20% per year, beginning one year from the anniversary date of the
grant. A recipient will be entitled to all stockholder rights with respect to
shares which have been earned and allocated under the Recognition Plan. In
addition, recipients of shares of restricted stock that have been granted
pursuant to the Recognition Plan that have not yet been earned and distributed
(other than shares granted pursuant to Performance Share Awards (as defined
below)) are entitled to direct the trustees of the Trust as to the voting of
such shares on the recipient's behalf. However, until such shares have been
earned and allocated, they may not be sold, assigned, pledged or otherwise
disposed of and are required to be held in the Trust. In addition, any cash
dividends or stock dividends declared in respect of unvested share awards will
be held by the Trust for the benefit of the recipients and such dividends,
including any interest thereon, will be paid out proportionately by the Trust
to the recipients thereof as soon as practicable after the share awards become
earned.
If a recipient terminates employment or service with the Company for
reasons other than death or disability, the recipient will forfeit all rights
to the allocated shares under restriction. All shares subject to an award
held by a recipient whose employment or service with the Company or any
subsidiary terminates due to death or disability shall be deemed earned as of
the recipient's last day of employment or service with the Company or any
subsidiary and shall be distributed as soon as practicable thereafter. In
addition, in the event that a recipient's employment or service with the
Company or any subsidiary terminates due to retirement or following a change
in control of the Company, all shares subject to an award held by a recipient
shall be deemed earned as of the recipient's last day of employment with or
service to the Company or any subsidiary and shall be distributed as soon as
practicable thereafter, provided that as of the date of such retirement or
change in control: (i) such treatment is either authorized or is not
prohibited by applicable
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laws and regulations, or (ii) an amendment to the Recognition Plan providing
for such treatment has been approved by the stockholders of the Company at a
meeting of stockholders held more than one year after the consummation of the
conversion.
Performance Share Awards. The Recognition Plan provides the committee
with the ability to condition or restrict the vesting or exercisability of any
Recognition Plan award upon the achievement of performance targets or goals as
set forth under the Recognition Plan. Any Recognition Plan award subject to
such conditions or restrictions is considered to be a "Performance Share
Award." Subject to the express provisions of the Recognition Plan and as
discussed in this paragraph, the committee has discretion to determine the
terms of any Performance Share Award, including the amount of the award, or a
formula for determining such, the performance criteria and level of
achievement related to these criteria which determine the amount of the award
granted, issued, retainable and/or vested, the period as to which performance
shall be measured for determining achievement of performance (a "performance
period"), the timing of delivery of any awards earned, forfeiture provisions,
the effect of termination of timing of delivery of any awards earned,
forfeiture provisions, the effect of termination of employment for various
reasons, and such further terms and conditions, in each case not inconsistent
with the Recognition Plan, as may be determined from time to time by the
committee. Each Performance Share Award shall be granted and administered to
comply with the requirements of Section 162(m) of the Internal Revenue Code.
Accordingly, the performance criteria upon which Performance Share Awards are
granted, issued, retained and/or vested shall be a measure based on one or
more Performance Goals (as defined below). Notwithstanding satisfaction of
any Performance Goals, the number of shares granted, issued, retainable and/or
vested under a Performance Share Award may be reduced or eliminated, but not
increased, by the committee on the basis of such further considerations as the
committee in its sole discretion shall determine.
Subject to stockholder approval of the Plan, the Performance Goals for
any Performance Share Award shall be based upon any one or more of the
following performance criteria, either individually, alternatively or any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either on an absolute basis or relative to a pre-established target,
to previous years' results or to a designated comparison group, in each case
as preestablished by the committee under the terms of the Performance Share
Award: net income, as adjusted for non-recurring items; cash earnings;
earnings per share; cash earnings per share; return on average equity; return
on average assets; assets; stock price; total stockholder return; capital; net
interest income; market share; cost control or efficiency ratio; and asset
growth. To the extent the Committee considers granting a Performance Share
Award, it may engage outside compensation consultants to assist it in
establishing such performance-based targets.
Federal Income Tax Consequences. Pursuant to Section 83 of the Internal
Revenue Code, recipients of Recognition Plan awards will recognize ordinary
income in an amount equal to the fair market value of the shares of common
stock granted to them at the time that the shares vest and become
transferable. A recipient of a Recognition Plan award may also elect,
however, to accelerate the recognition of income with respect to his or her
grant to the time when shares of Common Stock are first transferred to him or
her, notwithstanding the vesting schedule of such awards. The Company will be
entitled to deduct as a compensation expense for tax purposes the same amounts
recognized as income by recipients of Recognition Plan awards in the year in
which such amounts are included in income.
Section 162(m) of the Internal Revenue Code generally limits the
deduction for certain compensation in excess of $1.0 million per year paid by
a publicly-traded corporation to its covered executives. Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1.0 million deduction limitation. In order for compensation to
qualify for this exception: (i) it must be paid solely on account of the
attainment of one or more preestablished, objective performance goals; (ii)
the performance goal must be established by a compensation committee
consisting solely of two or more outside directors, as defined; (iii) the
material terms under which the compensation is to be paid, including
performance goals, must be disclosed to and approved by stockholders in a
separate vote prior to payment; and (iv) prior to payment, the compensation
committee must certify that the performance goals and any other material terms
were in fact satisfied.
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The Recognition Plan has been designed to meet the requirements of
Section 162(m) of the Internal Revenue Code and, as a result, the Company
believes that compensation attributable to Performance Share Awards granted
under the Recognition Plan in accordance with the foregoing requirements will
be fully deductible under Section 162(m) of the Internal Revenue Code. The
board of directors believes that the likelihood of any impact on the Company
from the deduction limitation contained in Section 162(m) of the Internal
Revenue Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. For a discussion of Statement of Financial
Accounting Standards No. 123, see "Proposal to Adopt the 2002 Stock Option
Plan - Description of the Option Plan - Accounting Treatment." Under the
intrinsic value method, the Company will also recognize a compensation expense
as shares of common stock granted pursuant to the Recognition Plan vest. The
amount of compensation expense recognized for accounting purposes is based
upon the fair market value of the common stock at the date of grant to
recipients, rather than the fair market value at the time of vesting for tax
purposes. The vesting of plan share awards will have the effect of increasing
the Company's compensation expense.
Stockholder Approval. No shares will be granted under the Recognition
Plan unless the Recognition Plan is approved by stockholders.
Shares to be Granted. The board of directors of the Company adopted the
Recognition Plan and the committee established thereunder intends to grant
shares to executive officers, key employees and non-employee directors of the
Company and the Savings Bank. The Recognition Plan provides that grants to
each employee and each non-employee director shall not exceed 25% and 5% of
the shares of common stock available under the Recognition Plan, respectively.
Awards made to non-employee directors in the aggregate may not exceed 30% of
the number of shares available under the Recognition Plan. However, the
timing of any such grants, the individual recipients and the specific amounts
of such grants have not been determined.
The Board of Directors recommends that stockholders vote FOR adoption of
the 2002 Recognition and Retention Plan and Trust Agreement.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Grant Thornton LLP,
independent certified public accountants, to perform the audit of the
Company's financial statements for the year ending December 31, 2002, and
further directed that the selection of auditors be submitted for ratification
by the stockholders at the Annual Meeting.
The Company has been advised by Grant Thornton LLP that neither that
firm nor any of its associates has any relationship with the Company 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 the Company's
auditors, the Company's Audit Committee considered whether the provision of
services, other than auditing services, by Grant Thornton LLP is compatible
with maintaining the auditor's independence. In addition to performing
auditing services, the Company's auditors performed tax-related services,
including the completion of the Company's corporate tax returns, in 2001. The
Audit Committee believes that Grant Thornton LLP's performance of these other
services is compatible with maintaining the auditor's independence.
-14-
Audit Fees
The aggregate amount of fees billed by Grant Thornton LLP for its audit
of the Company's annual financial statements for 2001 and for its reviews of
the Company's unaudited interim financial statements included in reports filed
by the Company under the 1934 Act during 2001 was $28,285.
Financial Information Systems Design and Implementation
The Company did not engage or pay any fees to Grant Thornton LLP with
respect to the provision of financial information systems design and
implementation services during 2001.
All Other Fees
The aggregate amount of fees billed by Grant Thornton LLP for all other
services rendered to the Company during 2001 was $73,000. These services
consisted primarily of preparing federal and state income tax returns and
other tax-related services and reviews of financial information in connection
with the conversion.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Grant Thornton LLP as independent auditors for the fiscal
year ending December 31, 2002.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders
of the Company, which is scheduled to be held in April 2003, must be received
at the principal executive offices of the Company, Second and Bridgeway
Streets, Aurora, Indiana 47001, Attention: Corporate Secretary, no later than
November 26, 2002. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the 1934 Act, 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 the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Article II, Section 12 of the
Company's Bylaws, which provides that the stockholder must give timely notice
thereof in writing to the Secretary of the Company (also by November 26,
2002). A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting,
(b) the name and address, as they appear on the Company's books, of the
stockholder proposing such business and, to the extent known, any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the Company's capital stock which are
beneficially owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder
to be supporting such proposal on the date of such stockholder notice, and (d)
any financial interest of the stockholder in such proposal (other than
interests which all stockholders would have). To be timely with respect to
the first annual meeting of stockholders scheduled, a stockholder's notice
must have been delivered to, or mailed and received at, the principal
executive offices of the Company no later than December 26, 2001.
-15-
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2001 accompanies this Proxy Statement. Such Annual Report is not
part of the proxy solicitation materials.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on Form 10-
KSB (without exhibits) for fiscal 2001 required to be filed with the
Commission under the 1934 Act. In addition, upon written request, the Company
will furnish copies of the exhibits to the Annual Report on Form 10-KSB for a
fee that covers the Company's reasonable expenses in furnishing such exhibits.
Such written requests should be directed to Jack D. Tandy, Corporate
Secretary, PFS Bancorp, Inc., Second and Bridgeway Streets, Aurora, Indiana
47001. The Form 10-K is not part of the proxy solicitation materials.
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 the Company.
The Company 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 the Company's Common Stock. In addition
to solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mel E. Green
Mel E. Green
President and Chief Executive Officer
Aurora, Indiana
March 25, 2002
-16-
Appendix A
PFS BANCORP, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors of PFS Bancorp, Inc. (the "Company") has
constituted and established an Audit Committee (the "Committee") with
authority, responsibility, and specific duties as described in this Audit
Committee Charter.
A. Composition
The Committee shall consist of three or more directors, each of whom is
independent of management and free from any relationship that, in the opinion
of the Board of Directors, as evidenced by its annual selection of such
Committee members, would interfere with the exercise of independent judgment
as a Committee member. Each Committee member must also be able to read and
understand fundamental financial statements (including the Company's balance
sheet, income statement and cash flow statement), or become able to do so
within a reasonable time after being appointed to the Committee. Furthermore,
at least one Committee member must have past employment experience in finance
or accounting, requisite professional certification in accounting, or other
comparable experience resulting in financial sophistication (including having
been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities). These requirements are
intended to satisfy the Nasdaq listing requirements relating to the
composition of audit committees, and shall be construed accordingly.
B. Mission Statement and Principal Functions
The Committee shall have access to all records of the Company, shall
perform the following functions, and shall have and may exercise such powers
as are appropriate to its purpose. The Committee shall:
(1) Understand the accounting policies used by the Company for
financial reporting and tax purposes and approve their application; it
shall also consider any significant changes in accounting policies that
are proposed by management or required by regulatory or professional
authorities.
(2) Review the Company's audited financial statements and related
footnotes and the "Management's Discussion and Analysis" portion of the
annual report on Form 10-KSB prior to the filing of such report, and
recommend to the Board of Directors whether such financial statements
shall be included in the Company's annual report on Form 10-KSB, based
upon the Committee's review and discussions with the outside auditors.
(3) Ensure that the outside auditors review the Company's interim
financial statements before the Company files its quarterly report on
Form 10-QSB with the SEC.
(4) Study the format and timeliness of financial reports
presented to the public or used internally and, when indicated,
recommend changes for appropriate consideration by management.
(5) Meet with the Company's legal counsel to review legal matters
that may have a significant impact on the Company or its financial
reports.
(6) Ensure that management has been diligent and prudent in
establishing accounting provisions for probable losses or doubtful
values and in making appropriate disclosures of significant financial
conditions or events.
(7) Review press releases submitted by management in connection
with the release of quarterly, annual, or special financial statements
and recommend to the Chairman of the Board any changes that appear
necessary to conform releases with appropriate professional practice.
(8) Review and reassess the adequacy of this Charter annually.
Independent Accountants
(9) Affirm an understanding with the outside auditors that they
are ultimately accountable to the Board of Directors and to the
Committee and that the Board of Directors and the Committee have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditors (or to nominate the outside
auditors to be proposed for shareholder approval in any proxy
statement).
(10) Ensure that the outside auditors submit to the Committee
written disclosures and the letter from the auditors required by
Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and discuss with the auditors the auditors'
independence.
(11) Maintain an active dialogue with the outside auditors
regarding any disclosed relationships or services that could affect the
objectivity and independence of the outside auditors, and be responsible
for taking, or recommending that the Board of Directors take,
appropriate action to oversee the outside auditors' independence.
(12) Discuss with the outside auditors the matters required to be
discussed by Statement on Standards ("SAS") No. 61 (Communication with
Audit Committees) and SAS No. 90 (Audit Committee Communications).
(13) Review management's recommendation on the outside auditors
to be selected each year and make a final proposal to the Board of
Directors in respect to such appointment.
(14) With the Chief Financial Officer, review the general scope
of the annual outside audit, approve the extent and nature of such
activity, and agree upon the general level of the related fees.
(15) Consider any significant non-audit assignments given to the
outside auditors and judge their impact upon the general independence of
the outside auditors as they perform the annual audit.
(16) Maintain independent contact with the senior personnel of
the outside auditors and communicate freely and openly with them
regarding financial developments.
Internal Audit Program
(17) Cause to be maintained an appropriate internal audit program
covering the Company and all its subsidiaries by internal auditors who
report to the Committee and the Board of Directors.
(18) The Accounting Department shall report at least annually to
the Committee regarding the financial budget and audit schedules and the
adequacy thereof.
(19) Review the scope and coordination efforts of the joint
internal/external audit program with both internal and external
auditors.
(20) Review reports of any embezzlement and other reportable
incidents related to the Company's financial statement or financial
reporting and supervise and direct any special projects or
investigations considered necessary by the Committee.
(21) Review reports of the internal auditors and reports of
financial examinations made by regulatory agencies and management's
response to them, evaluate the reports in regard to control and/or
compliance implications and determine whether appropriate corrective
action has been implemented.
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Regulatory Compliance
(22) Cause to be maintained an appropriate regulatory compliance
program covering the Company and its subsidiaries to aid compliance with
the laws and regulations applicable to financial institutions.
(23) Review reports of the compliance officer covering the scope
and adequacy of the compliance program, the degree of compliance and
cooperation, and the implementation of corrective actions (if necessary
or appropriate.)
(24) Receive reports on Peoples Federal Savings Bank's (the
"Bank") compliance with Section 112 of the Federal Deposit Insurance
Corporation Improvement Act and review the basis for the reports issued
under the rule with management and the Bank's independent public
accountant.
Internal Controls and Procedures
(25) Review periodically the scope and implications of the
Company's internal financial controls and procedures and consider their
adequacy.
(26) Maintain direct access to the senior Bank staff. If useful,
require that studies be initiated on subjects of special interest to the
Committee.
(27) Review the comments on internal control submitted by the
outside and internal auditors and insure that appropriate suggestions
for improvement are promptly considered for inclusion into the Company's
internal financial procedures.
Special Duties
(28) If requested by the Chairman of the Board, make special
studies of matters related to the financial operations of the Company or
to allegations of managerial misconduct by its executives.
C. Meetings
Meetings of the Committee will be held annually after completion of the
financial audit and prior to the filing of the annual report on Form 10-KSB .
Meetings shall also be held at such other times as shall be required by
the Chairman of the Board or the Committee. Meetings may be called by the
Chairman of the Committee and/or management of the Company. All meetings of
the Committee shall be held pursuant to the Bylaws of the Company with regard
to notice and waiver thereof. Written minutes pertaining to each meeting
shall be filed with the Secretary and an oral report shall be presented by the
Committee at each Board meeting.
At the invitation of the Chairman of the Committee, the meetings shall
be attended by the Chief Executive Officer, the Chief Financial Officer, the
representatives of the independent accounting firm, and such other persons
whose attendance is appropriate to the matters under consideration.
Adopted by Committee
as of July 12, 2001
Approved by Board
as of July 12, 2001
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Appendix B
PFS BANCORP, INC.
2002 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
PFS Bancorp, Inc. (the "Corporation") hereby establishes this 2002 Stock
Option Plan (the "Plan") upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and Non-
Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees and Non-Employee Directors for outstanding
performance. All Incentive Stock Options issued under this Plan are intended
to comply with the requirements of Section 422 of the Code, and the
regulations thereunder, and all provisions hereunder shall be read,
interpreted and applied with that purpose in mind. Each recipient of an
Option hereunder is advised to consult with his or her personal tax advisor
with respect to the tax consequences under federal, state, local and other tax
laws of the receipt and/or exercise of an Option hereunder.
ARTICLE III
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 pronouns shall
include the feminine pronouns and the singular shall include the plural.
3.01 "Bank" means Peoples Federal Savings Bank, the wholly owned
subsidiary of the Corporation.
3.02 "Beneficiary" means the person or persons designated by an
Optionee to receive any benefits payable under the Plan in the event of such
Optionee'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 Optionee's surviving spouse,
if any, or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence
of any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R. Section 574.4, unless a presumption of control is
successfully rebutted or unless the transaction is exempted by 12 C.F.R. Section
574.3(c)(vii), or any successor to such sections; (ii) an event that would be
required to be reported in response to Item 1(a) of Form 8-K or Item 6(e) of
Schedule 14A of Regulation 14A pursuant to the Exchange Act, or any successor
thereto, whether or not any class of securities of the Corporation is registered
under the Exchange Act; (iii) any "person" (as such 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 Corporation representing 20% or more of the combined voting
power of the Corporation's then outstanding securities except for any securities
purchased by the Corporation or the Bank; or (iv) during any period of thirty-
six consecutive months during the term of an Option, individuals who at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof, each of whom shall be a Non-
Employee Director (i) as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or
any successor thereto, and (ii) within the meaning of Section 162(m) of the
Code or any successor thereto.
3.07 "Common Stock" means shares of the common stock, $0.01 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Optionee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if
no such plan applies, which would qualify such Optionee for disability
benefits under the long-term disability plan maintained by the Corporation, if
such individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board adopts this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or
a Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Option is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the
composite of the markets, if more than one) or national quotation system in
which such shares are then traded, or if no such closing prices are reported,
the mean between the high bid and low asked prices that day on the principal
market or national quotation system then in use, or if no such quotations are
available, the price furnished by a professional securities dealer making a
market in such shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Boards of the
Corporation or any Subsidiary Company or any successor thereto, including an
Advisory Director or a Director Emeritus of the Boards of the Corporation
and/or any Subsidiary Company who is not an Officer or Employee of the
Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Offering" means the offering of Common Stock to the public in
connection with the conversion of the Bank to the stock form of organization
and the issuance of the capital stock of the Bank to the Corporation.
3.17 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.18 "OTS" means the Office of Thrift Supervision.
3.19 "Option" means a right granted under this Plan to purchase Common
Stock.
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3.20 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.21 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan. With respect to Non-
Employee Directors, retirement means retirement from service on the Board of
Directors of the Corporation or a Subsidiary Company or any successors thereto
after attaining the age of 65.
3.22 "Subsidiary Companies" means those subsidiaries of the Corporation,
including the Bank, which meet the definition of "subsidiary corporations" set
forth in Section 424(f) of the Code, at the time of granting of the Option in
question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt,
amend and rescind such rules, regulations and procedures as, in its opinion,
may be advisable in the administration of the Plan, including, without
limitation, rules, regulations and procedures which (i) deal with satisfaction
of an Optionee's tax withholding obligation pursuant to Section 12.02 hereof,
(ii) include arrangements to facilitate the Optionee's ability to borrow funds
for payment of the exercise or purchase price of an Option, if applicable,
from securities brokers and dealers, and (iii) include arrangements which
provide for the payment of some or all of such exercise or purchase price by
delivery of previously owned shares of Common Stock or other property and/or
by withholding some of the shares of Common Stock which are being acquired.
The interpretation and construction by the Committee of any provisions of the
Plan, any rule, regulation or procedure adopted by it pursuant thereto or of
any Option shall be final and binding in the absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as
defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto.
In addition, each member of the Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and regulations thereunder at
such times as is required under such regulations. 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,
regulations and procedures as it deems appropriate for the conduct of its
affairs. It may appoint one of its members to be chairman and any person,
whether or not a member, to be its secretary or agent. The Committee shall
report its actions and decisions to the Board at appropriate times but in no
event less than one time per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, previously granted or awarded under
this Plan to an Employee who is discharged from the employ of the Corporation
or a Subsidiary Company for cause, which, for purposes hereof, shall mean
termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Options granted to a Non-Employee Director who
is removed for cause pursuant to the Corporation's Articles of Incorporation
or Bylaws shall terminate as of the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan, any rule, regulation or procedure
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adopted by it pursuant thereto or any Options 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
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(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 Corporation and its Subsidiary Companies
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Options granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as
may be required. The Corporation shall not be required to issue or deliver
any certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any Federal or state law or any rule or
regulation of any government body, which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may
be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Option granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Options may be granted to such Employees or Non-Employee Directors of
the Corporation and its Subsidiary Companies as may be designated from time to
time by the Board or the Committee. Options may not be granted to individuals
who are not Employees or Non-Employee Directors of either the Corporation or
its Subsidiary Companies. Non-Employee Directors shall be eligible to receive
only Non-Qualified Options.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided
in Article IX, shall be 152,088. None of such shares shall be the subject of
more than one Option at any time, but if an Option as to any shares is
surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be
exercisable, the number of shares covered thereby shall again become available
for grant under the Plan as if no Options had been previously granted with
respect to such shares. During the time this Plan remains in effect, the
aggregate grants of Options to each Employee and each Non-Employee Director
shall not exceed 25% and 5% of the shares of Common Stock available under the
Plan, respectively. Options granted to Non-Employee Directors in the
aggregate may not exceed 30% of the number of shares available under this
Plan.
6.02 Source of Shares. The shares of Common Stock issued under the
Plan may be authorized but unissued shares, treasury shares or shares
purchased by the Corporation on the open market or from private sources for
use under the Plan.
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ARTICLE VII
DETERMINATION OF
OPTIONS, NUMBER OF SHARES, ETC.
The Board or the Committee shall, in its discretion, determine from time
to time which Employees will be granted Options under the Plan, the number of
shares of Common Stock subject to each Option, and whether each Option will be
an Incentive Stock Option or a Non-Qualified Stock Option. In making all such
determinations there shall be taken into account the duties, responsibilities
and performance of each respective Employee, his present and potential
contributions to the growth and success of the Corporation, his salary and
such other factors as the Board or the Committee shall deem relevant to
accomplishing the purposes of the Plan. The Board or the Committee may but
shall not be required to request the written recommendation of the Chief
Executive Officer of the Corporation other than with respect to Options to be
granted to him.
ARTICLE VIII
OPTIONS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it
pertains, the exercise price, whether it is a Non-Qualified Option or an
Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Board or the Committee in each instance shall deem
appropriate, provided they are not inconsistent with the terms, conditions and
provisions of this Plan. Each Optionee shall receive a copy of his executed
Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the subject
Common Stock may be purchased upon exercise of an Incentive Stock Option shall
be no less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock at the time such Incentive Stock Option is granted, except as
provided in Section 8.09(b).
(b) Non-Qualified Options. The per share price at which the subject
Common Stock may be purchased upon exercise of a Non-Qualified Option shall be
no less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock at the time such Non-Qualified Option is granted.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified Options
granted hereunder shall become vested and exercisable at the rate of 20% per
year over five years, commencing one year from the date of grant and an
additional 20% shall vest on each successive anniversary of the date the
Option was granted, and the right to exercise shall be cumulative.
Notwithstanding the foregoing, except as provided in Section 8.03(b) hereof,
no vesting shall occur on or after an Employee's employment or service as a
Non-Employee Director with the Corporation and all Subsidiary Companies is
terminated. In determining the number of shares of Common Stock with respect
to which Options are vested and/or exercisable, fractional shares will be
rounded down to the nearest whole number, provided that such fractional shares
shall be aggregated and deemed vested on the final date of vesting.
(b) Accelerated Vesting. Unless the Board or the Committee shall
specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the
date an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death or
Disability. All Options hereunder shall become immediately vested and
exercisable in full on the date an Optionee terminates his employment with the
Corporation or a Subsidiary Company due to Retirement or as of the effective
date of a Change in Control if as of the date of such Retirement or Change in
Control
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of the Corporation (i) such treatment is either authorized or is not
prohibited by applicable laws and regulations, or (ii) an amendment to the
Plan providing for such treatment has been approved by the stockholders of the
Corporation at a meeting of stockholders held more than one year after the
consummation of the Offering.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and 8.09,
each Option or portion thereof granted to Employees and Non-Employee Directors
shall be exercisable at any time on or after it vests and becomes exercisable
until the earlier of (i) ten (10) years after its date of grant or (ii) six
(6) months after the date on which the Optionee ceases to be employed (or in
the service of the Board of Directors) by the Corporation and all Subsidiary
Companies, unless the Board of Directors or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
to a period not exceeding three (3) years. In the event an Incentive Stock
Option is not exercised within 90 days of the effective date of termination of
Optionee's status as an Employee, the tax treatment accorded Incentive Stock
Options by the Code may not be available.
(b) Exception for Termination Due to Disability, Retirement, Change in
Control or Death. Unless the Board or the Committee shall specifically state
otherwise at the time an Option is granted: (i) if an Employee terminates his
employment with the Corporation or a Subsidiary Company as a result of
Disability or Retirement without having fully exercised his Options, the
Employee shall have the right, during the three (3) year period following his
termination due to Disability or Retirement, to exercise such Options, and
(ii) if a Non-Employee Director terminates his service as a director
(including service as an Advisory Director or Director Emeritus) with the
Corporation or a Subsidiary Company as a result of Disability or Retirement
without having fully exercised his Options, the Non-Employee Director shall
have the right, during the three (3) year period following his termination due
to Disability or Retirement, to exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
Company following a Change in Control of the Corporation without having fully
exercised his Options, the Optionee shall have the right to exercise such
Options during the remainder of the original ten (10) year term of the Option
from the date of grant.
If an Optionee dies while in the employ or service of the Corporation or
a Subsidiary Company or terminates employment or service with the Corporation
or a Subsidiary Company as a result of Disability or Retirement and dies
without having fully exercised his Options, the executors, administrators,
legatees or distributees of his estate shall have the right, during the one
(1) year period following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten (10)
years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an
Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the
Optionee's guardian or legal representative. Notwithstanding the foregoing,
or any other provision of this Plan, an Optionee who holds Non-Qualified
Options may transfer such Options to his immediate family or to a duly
established trust for the benefit of one or more of these individuals. For
purposes hereof, "immediate family" includes but is not necessarily limited
to, the Participant's spouse, children (including step children), parents,
grandchildren and great grandchildren. Options so transferred may thereafter
be transferred only to the Optionee who originally received the grant or to an
individual or trust to whom the Optionee could have initially transferred the
Option pursuant to this Section 8.05. Options which are transferred pursuant
to this Section 8.05 shall be exercisable by the transferee according to the
same terms and conditions as applied to the Optionee.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be
set forth in the written Stock Option Agreement provided for in Section 8.01
above.
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8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall
be made to the Corporation upon exercise of the Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be
made by the Optionee (i) in cash or by check, (ii) by delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker
to sell the shares and then to properly deliver to the Corporation the amount
of sale proceeds to pay the exercise price, all in accordance with applicable
laws and regulations, or (iii) at the discretion of the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) equal in Fair Market Value to the purchase price of the
shares to be acquired pursuant to the Option, by withholding some of the
shares of Common Stock which are being purchased upon exercise of an Option,
or any combination of the foregoing. With respect to subclause (iii) hereof,
the shares of Common Stock delivered to pay the purchase price must have
either been (x) purchased in open market transactions or (y) issued by the
Corporation pursuant to a plan thereof more than six months prior to the
exercise date of the Option (or one year in the case of previously exercised
Incentive Stock Options).
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded
on the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained elsewhere
in this Plan and as long as required by Section 422 of the Code, the aggregate
Fair Market Value, determined as of the time an Incentive Stock Option is
granted, of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year, under
this Plan and stock options that satisfy the requirements of Section 422 of
the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option
is granted, owns, directly or indirectly, more than ten percent (10%) of the
total combined voting power of all classes of stock issued to stockholders of
the Corporation or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common Stock
of the Corporation at the time of grant, and such Incentive Stock Option shall
by its terms not be exercisable after the earlier of the date determined under
Section 8.03 or the expiration of five (5) years from the date such Incentive
Stock Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within
two (2) years after the grant of such Incentive Stock Option or within one (1)
year after the acquisition of such shares, setting forth the date and manner
of disposition, the number of shares disposed of and the price at which such
shares were disposed of. The Corporation shall be entitled to withhold from
any compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of Federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee may,
in its discretion, require shares of Common Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section
8.09(c).
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ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Option relates, the maximum
number of shares that can be covered by Options to each Employee, each Non-
Employee Director and Non-Employee Directors as a group and the exercise price
per share of Common Stock under any Option shall be proportionately adjusted
for any increase or decrease in the total number of outstanding shares of
Common Stock issued subsequent to the effective date of this Plan resulting
from a split, subdivision or consolidation of shares or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
such shares effected without receipt or payment of consideration by the
Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation, the shares of the
Corporation's Common Stock shall be exchanged for other securities of the
Corporation or of another corporation, each recipient of an Option shall be
entitled, subject to the conditions herein stated, to purchase or acquire such
number of shares of Common Stock or amount of other securities of the
Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such Optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Options. Notwithstanding any provision to the contrary, the exercise price of
shares subject to outstanding Options may be proportionately adjusted upon the
payment of a special large and nonrecurring dividend that has the effect of a
return of capital to the stockholders, providing that the adjustment to the
per share exercise price shall satisfy the criteria set forth in Emerging
Issues Task Force 90-9 (or any successor thereto) so that the adjustments do
not result in compensation expense, and provided further that if such
adjustment with respect to incentive stock options would be treated as a
modification of the outstanding incentive stock options with the effect that,
for purposes of Sections 422 and 425(h) of the Code, and the rules and
regulations promulgated thereunder, new incentive options would be deemed to
be granted, then no adjustment to the per share exercise price of outstanding
stock options shall be made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Options have not been
granted, subject to regulations of the OTS and any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the holder of an Option, alter or impair any
Option previously granted or awarded under this Plan as specifically
authorized herein.
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Options hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director of the
Corporation or a Subsidiary Company to continue in such capacity.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the
Corporation the amount required to be withheld as a condition to delivering
the shares acquired pursuant to an Option. The Corporation also may withhold
or collect
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amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Board of Directors or the
Committee is authorized to adopt rules, regulations or procedures which
provide for the satisfaction of an Optionee's tax withholding obligation by
the retention of shares of Common Stock to which the Employee would otherwise
be entitled pursuant to an Option and/or by the Optionee's delivery of
previously owned shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Options may be granted hereunder no earlier than the
date this Plan is approved by stockholders and no later than the termination
of the Plan, provided this Plan is approved by stockholders of the Corporation
pursuant to Article XIV hereof.
13.02 Term of Plan. Unless sooner terminated, this Plan shall remain in
effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Options
previously granted and such Options shall remain valid and in effect until
they have been fully exercised or earned, are surrendered or by their terms
expire or are forfeited.
ARTICLE XIV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at a
meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code
and regulations thereunder, and (iii) the Nasdaq Stock Market for continued
quotation of the Common Stock on the Nasdaq National Market.
ARTICLE XV
MISCELLANEOUS
15.01 Governing Law. To the extent not governed by Federal law, this
Plan shall be construed under the laws of the State of Indiana.
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Appendix C
PFS BANCORP, INC.
2002 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 PFS Bancorp, Inc. (the "Corporation") hereby establishes the 2002
Recognition and Retention Plan (the "Plan") and Trust (the "Trust") upon the
terms and conditions hereinafter stated in this 2002 Recognition and Retention
Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of the Plan is to retain personnel of experience and ability
in key positions by providing Employees and Non-Employee Directors with a
proprietary interest in the Corporation and its Subsidiary Companies as
compensation for their contributions to the Corporation and the Subsidiary
Companies and as an incentive to make such contributions in the future. Each
Recipient of a Plan Share Award hereunder is advised to consult with his or
her personal tax advisor with respect to the tax consequences under federal,
state, local and other tax laws of the receipt of a Plan Share Award
hereunder.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine
pronouns shall include the feminine pronouns and the singular shall include
the plural.
3.01 "Bank" means Peoples Federal Savings Bank, the wholly owned
subsidiary of the Corporation.
3.02 "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.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence
of any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R. Section 574.4, unless a presumption of control is
successfully rebutted or unless the transaction is exempted by 12 C.F.R.
Section 574.3(c)(vii), or any successor to such sections; (ii) an event that
would be required to be reported in response to Item 1(a) of Form 8-K or Item
6(e) of Schedule 14A of Regulation 14A pursuant to the Exchange Act or any
successor thereto, whether or not any class of securities of the Corporation
is registered under the Exchange Act; (iii) any "person" (as such 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 Corporation representing 20% or more of
the combined voting power of the Corporation's then outstanding securities
except for any securities purchased by the Corporation or the Bank; or (iv)
during any period of thirty-six consecutive months during the term of a Plan
Share Award, individuals who at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.07 "Common Stock" means shares of the common stock, $.01 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company or, if
no such plan applies, which would qualify such individual for disability
benefits under the long-term disability plan maintained by the Corporation, if
such individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or
Subsidiary Company or is an Officer of the Corporation or Subsidiary Company,
but not including directors who are not also Officers of or otherwise employed
by the Corporation or Subsidiary Company.
3.11 "Employer Group" means the Corporation and any Subsidiary Company
which, with the consent of the Board, agrees to participate in the Plan.
3.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.13 "Non-Employee Director" means a member of the Boards of the
Corporation or the or a Subsidiary Company or any successor thereto, including
an Advisory Director or a Director Emeritus of the Boards of the Corporation
and/or the Bank, who is not an Officer or Employee of the Corporation or the
Bank or any Subsidiary Company.
3.14 "Offering" means the offering of Common Stock to the public in
connection with the conversion of the Bank to the stock form of organization
and the issuance of the capital stock of the Bank to the Corporation.
3.15 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.16 "Performance Share Award" means a Plan Share Award granted to a
Recipient pursuant to Section 7.05 of the Plan.
3.17 "Performance Goal" means an objective for the Corporation or any
Subsidiary Company or any unit thereof or any Employee of the foregoing that
may be established by the Committee for a Performance Share Award to become
vested, earned or exercisable. The establishment of Performance Goals are
intended to make the applicable Performance Share Awards "performance-based"
compensation within the meaning of Section 162(m) of the Code, and the
Performance Goals shall be based on one or more of the following criteria:
(i) net income, as adjusted for non-recurring items;
(ii) cash earnings;
(iii) earnings per share;
(iv) cash earnings per share;
(v) return on average equity;
(vi) return on average assets;
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(vii) assets;
(viii) stock price;
(ix) total stockholder return;
(x) capital;
(xi) net interest income;
(xii) market share;
(xiii) cost control or efficiency ratio; and
(xiv) asset growth.
3.19 "Plan Shares" or "Shares" means shares of Common Stock which may
be distributed to a Recipient pursuant to the Plan.
3.20 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII, and includes Performance Share Awards.
3.21 "Recipient" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director who receives a Plan Share Award or
Performance Share Award under the Plan.
3.22 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan.
3.23 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Bank, which meet the definition of "subsidiary
corporation" set forth in Section 424(f) of the Code, at the time of the
granting of the Plan Share Award in question.
3.24 "Trustee" means such firm, entity or persons approved by the Board
to hold legal title to the Plan and the Plan assets for the purposes set forth
herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of
the Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. In addition, each member of the Committee
shall be an "outside director" within the meaning of Section 162(m) of the
Code and the regulations thereunder at such times as is required under such
regulations. The Committee shall have all of the powers allocated to it in
this and other Sections of the Plan. The interpretation and construction by
the Committee of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding in the absence of action by the Board.
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, regulations 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 once per calendar year.
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the
Board. The Board may in its discretion from time to time remove members from,
or add members to, the Committee, and may remove or replace the Trustee,
provided that any directors who are selected as members of the Committee shall
be Non-Employee Directors.
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4.03 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 Plan Shares or Plan Share 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
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(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 Corporation and any Subsidiary Companies
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency or
stockholders as may be required.
4.05 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares issued pursuant to a Plan Share Award
noting that such shares may be restricted by applicable laws and regulations.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiary Companies to the Trust established under
this Plan. Such amounts may be paid in cash or in shares of Common Stock and
shall be paid to the Trust at the designated time of contribution. No
contributions by Employees or Non-Employee Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 60,835 shares of Common Stock,
subject to adjustment as provided in Section 10.01 hereof, which shares shall
be purchased (from the Corporation and/or, if permitted by applicable
regulations, from stockholders thereof) by the Trust with funds contributed by
the Corporation. During the time this Plan remains in effect, Awards to each
Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock available under the Plan, respectively. Plan Share
Awards to Non-Employee Directors in the aggregate shall not exceed 30% of the
number of shares available under this Plan.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards. Plan Share Awards and Performance Share Awards may be
made to such Employees and Non-Employee Directors as may be selected by the
Board or the Committee. In selecting those Employees to whom Plan Share
Awards and/or Performance Share Awards may be granted and the number of Shares
covered by such Awards, the Board or the Committee shall consider the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors as deemed relevant to
accomplishing the purposes of the Plan. The Board or the Committee may but
shall not be required to request the written recommendation of the Chief
Executive Officer of the Corporation other than with respect to Plan Share
Awards and/or Performance Share Awards to be granted to him.
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6.02 Form of Allocation. As promptly as practicable after an
allocation pursuant to Section 6.01 that a Plan Share Award or a Performance
Share Award is to be issued, the Board or the Committee shall notify the
Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Board or
the Committee so notifies the Recipient shall be considered the date of grant
of the Plan Share Award or the Performance Share Award. The Board or the
Committee shall maintain records as to all grants of Plan Share Awards or
Performance Share Awards under the Plan.
6.03 Allocations Not Required to any Specific Employee or Non-Employee
Director. No Employee or Non-Employee Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
total discretion of the Board or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share
Awards granted shall be earned by a Recipient at the rate of twenty percent
(20%) of the aggregate number of Shares covered by the Award as of each annual
anniversary of the date of grant of the Award. If the employment of an
Employee or service as a Non-Employee Director is terminated prior to the
fifth (5th) annual anniversary of the date of grant of a Plan Share Award for
any reason (except as specifically provided in subsections (b), (c) and (d)
below), the Recipient shall forfeit the right to any Shares subject to the
Award which have not theretofore been earned. In the event of a forfeiture of
the right to any Shares subject to an Award, such forfeited Shares shall
become available for allocation pursuant to Section 6.01 hereof as if no Award
had been previously granted with respect to such Shares. No fractional shares
shall be distributed pursuant to this Plan.
(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient whose employment with the
Corporation or any Subsidiary Company or service as a Non-Employee Director
terminates due to death or Disability shall be deemed earned as of the
Recipient's last day of employment with or service to the Corporation or any
Subsidiary Company (provided, however, no such accelerated vesting shall occur
if a Recipient remains employed by at least one member of the Employer Group)
and shall be distributed as soon as practicable thereafter.
(c) Exception for Retirement or a Change in Control of the
Corporation. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient shall be
deemed to be earned on the date a Recipient terminates his employment or
service as a non-employee director with the Corporation or a Subsidiary
Company due to Retirement or as of the effective date of a Change in Control
of the Corporation if, as of the date of such Retirement or Change in Control
of the Corporation (i) such treatment is either authorized or is not
prohibited by applicable laws and regulations, or (ii) an amendment to the
Plan providing for such treatment has been approved by stockholders of the
Corporation at a meeting of the stockholders held more than one (1) year after
the consummation of the Offering.
(d) Revocation for Misconduct. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award or Performance Share Award or
portion thereof, previously awarded under this Plan, to the extent Plan Shares
have not been distributed hereunder to the Recipient, whether or not yet
earned, in the case of an Employee who is discharged from the employ of the
Corporation or any Subsidiary Company for cause (as hereinafter defined).
Termination for cause shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Plan Share
Awards granted to a Non-
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Employee Director who is removed for cause pursuant tothe Corporation's
Articles of Incorporation and Bylaws or the Bank's Charter and Bylaws shall
terminate as of the effective date of such removal.
7.02 Distribution of Dividends. Any cash dividends (including special
large and nonrecurring dividends including any that has the effect of a return
of capital to the Corporation's stockholders) or stock dividends declared in
respect of each unvested Plan Share Award (including a Performance Share
Award) will be held by the Trust for the benefit of the Recipient on whose
behalf such Plan Share Award (including a Performance Share Award) is then
held by the Trust and such dividends, including any interest thereon, will be
paid out proportionately by the Trust to the Recipient thereof as soon as
practicable after the Plan Share Awards become earned. Any cash dividends or
stock dividends declared in respect of each vested Plan Share held by the
Trust will be paid by the Trust, as soon as practicable after the Trust's
receipt thereof, to the Recipient on whose behalf such Plan Share is then held
by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Subject to the
provisions of Section 7.05 hereof, Plan Shares shall be distributed to the
Recipient or his Beneficiary, as the case may be, as soon as practicable after
they have been earned.
(b) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall be made
in cash.
(c) Withholding. The Trustee may withhold from any cash payment
or Common Stock distribution made under this Plan sufficient amounts to cover
any applicable withholding and employment taxes, and if the amount of a cash
payment is insufficient, the Trustee may require the Recipient or Beneficiary
to pay to the Trustee the amount required to be withheld as a condition of
delivering the Plan Shares. The Trustee shall pay over to the Corporation or
any Subsidiary Company which employs or employed such Recipient any such
amount withheld from or paid by the Recipient or Beneficiary.
(d) Restrictions on Selling of Plan Shares. Plan Share Awards
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan. Upon
distribution, the Board or the Committee may require the Recipient or his
Beneficiary, as the case may be, to agree not to sell or otherwise dispose of
his distributed Plan Shares except in accordance with all then applicable
federal and state securities laws, and the Board or the Committee may cause a
legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict the transfer of the distributed Plan Shares
for such period of time or under such circumstances as the Board or the
Committee, upon the advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award (other than a
Performance Share Award) has been made, the Recipient shall be entitled to
direct the Trustee as to the voting of the Plan Shares which are covered by
the Plan Share Award and which have not yet been earned and distributed to him
pursuant to Section 7.03, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust
which have not been awarded under a Plan Share Award, shares subject to
Performance Share Awards which have not yet vested and shares which have been
awarded as to which Recipients have not directed the voting shall be voted by
the Trustee in its discretion.
7.05 Performance Awards
(a) Designation of Performance Share Awards. The Committee may
determine to make any Plan Share Award a Performance Share Award by making
such Plan Share Award contingent upon the achievement of a Performance Goal or
any combination of Performance Goals. Each Performance Share Award shall be
evidenced by a written agreement ("Award Agreement"), which shall set forth
the Performance Goals applicable to the Performance Share Award, the maximum
amounts payable and such other terms and conditions as are applicable to the
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Performance Share Award. Each Performance Share Award shall be granted and
administered to comply with the requirements of Section 162(m) of the Code and
with OTS Regulatory Bulletin 27a, or any successor thereto.
(b) Timing of Grants. Any Performance Share Award shall be made
not later than 90 days after the start of the period for which the Performance
Share Award relates and shall be made prior to the completion of 25% of such
period. All determinations regarding the achievement of any Performance Goals
will be made by the Committee. The Committee may not increase during a year
the amount of a Performance Share Award that would otherwise be payable upon
achievement of the Performance Goals but may reduce or eliminate the payments
as provided for in the Award Agreement.
(c) Restrictions on Grants. Nothing contained in the Plan will
be deemed in any way to limit or restrict the Committee from making any Award
or payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
(d) Rights of Recipients. Notwithstanding anything to the
contrary herein, a Participant who receives a Performance Share Award payable
in Common Stock shall have no rights as a stockholder until the Common Stock
is issued pursuant to the terms of the Award Agreement.
(e) Transferability. A Participant's interest in a Performance
Share Award may not be sold, assigned, transferred, pledged, or otherwise
encumbered.
(f) Distribution. No Performance Share Award or portion thereof
that is subject to the attainment or satisfaction of a condition of a
Performance Goal shall be distributed or considered to be earned or vested
until the Committee certifies in writing that the conditions or Performance
Goal to which the distribution, earning or vesting of such Award is subject
have been achieved.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing their duties, the Trustee shall have the power to do
all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in
making such investment, the Trustee is authorized to purchase Common Stock
from the Corporation or from any other source, and such Common Stock so
purchased may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United States Government or its agencies or such
other investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust.
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(d) To cause stocks, bonds or other securities to be registered
in the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the
opinion of the Trustee be reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their
rights, duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled
person or entity to the extent required by applicable law, or any other person
determined by the Board or the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation or, in the
discretion of the Corporation, the Trust.
8.05 Indemnification. Subject to the requirements of applicable laws
and regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustee's powers and the discharge of their
duties hereunder, unless the same shall be due to their gross negligence or
willful misconduct.
ARTICLE IX
DEFERRED PAYMENTS
9.01 Deferral of Plan Shares. Notwithstanding any other provision of
this Plan, any Recipient may elect, with the approval of the Committee and
consistent with any rules and regulations established by the Board, to defer
the receipt of Plan Shares granted hereunder.
9.02 Timing of Election. The election to defer the delivery of any
Plan Shares must be made no later than the last day of the calendar year
preceding the calendar year in which the Recipient would otherwise have an
unrestricted right to receive such Shares. Deferrals of eligible Plan Shares
shall only be allowed for Plan Share Awards for which all applicable
restrictions lapse while the Recipient is in active service with the
Corporation or one of the Subsidiary Companies. Any election to defer the
proceeds from an eligible Plan Share Award shall be irrevocable as long as the
Recipient remains an Employee or a Non-Employee Director.
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ARTICLE X
MISCELLANEOUS
10.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any unvested Plan Share Award relates shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
the Plan resulting from any split, subdivision or consolidation of shares or
other capital adjustment, the payment of a stock dividend or other increase or
decrease in such shares effected without receipt or payment of consideration
by the Corporation. If, upon a merger, consolidation, reorganization,
liquidation, recapitalization or the like of the Corporation or of another
corporation, each recipient of a Plan Share Award shall be entitled, subject
to the conditions herein stated, to receive such number of shares of Common
Stock or amount of other securities of the Corporation or such other
corporation as were exchangeable for the number of shares of Common Stock of
the Corporation which such Recipients would have been entitled to receive
except for such action.
10.02 Amendment and Termination of Plan. The Board may, by resolution,
at any time amend or terminate the Plan, subject to any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the Recipient, alter or impair his Plan Share
Award except as specifically authorized herein. Upon termination of the Plan,
the Recipient's Plan Share Awards shall be distributed to the Recipient
regardless of whether or not such Plan Share Award had otherwise been earned
under the service requirements set forth in Article VII. Notwithstanding any
other provision of the Plan, this Plan may not be terminated until such time
as all Plan Shares held by the Trust have been awarded to Plan Recipients and
shall be deemed to be earned prior to the time of termination.
10.03 Nontransferable. Plan Share Awards and Performance Share Awards
and rights to Plan Shares shall not be transferable by a Recipient, and during
the lifetime of the Recipient, Plan Shares may only be earned by and paid to a
Recipient who was notified in writing of an Award by the Committee pursuant to
Section 6.02. No Recipient or Beneficiary shall have any right in or claim to
any assets of the Plan or Trust, nor shall the Corporation or any Subsidiary
Company be subject to any claim for benefits hereunder.
10.04 Employment or Service Rights. Neither the Plan nor any grant of a
Plan Share Award, Performance Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in connection with the
Plan shall create any right on the part of any Employee or Non-Employee
Director to continue in such capacity.
10.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award or Performance Share Award, except as expressly
provided in Sections 7.02, 7.04 and 7.05 above, prior to the time said Plan
Shares are actually earned and distributed to him.
10.06 Governing Law. To the extent not governed by federal law, the
Plan and Trust shall be governed by the laws of the State of Indiana.
10.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder no earlier than the date this Plan
is approved by the stockholders of the Corporation and prior to the
termination of the Plan. Notwithstanding the foregoing or anything to the
contrary in this Plan, the implementation of this Plan is subject to the
approval of the Corporation's stockholders.
10.08 Term of Plan. This Plan shall remain in effect until the earlier
of (i) ten (10) years from the Effective Date, (ii) termination by the Board,
or (iii) the distribution to Recipients and Beneficiaries of all the assets of
the Trust.
C-9
10.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Corporation under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
time.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustees of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this 21st day of
March, 2002.
PFS BANCORP, INC.
By: /s/ Mel E. Green
-------------------------------------
Mel E. Green
President and Chief Executive Officer
ATTEST: TRUSTEES:
/s/ Jack D. Tandy /s/ Robert L. Laker
- ------------------------ ------------------------------------
Jack D. Tandy, Secretary Robert L. Laker
/s/ Gilbert L. Houze
-------------------------------------
Gilbert L. Houze
/s/ Dale R. Moeller
-------------------------------------
Dale R. Moeller
/s/ Carl E. Petty
-------------------------------------
Carl E. Petty
C-10
REVOCABLE PROXY
PFS BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PFS
BANCORP, INC. If no boxes are marked, your vote will be cast as recommended
by the Board of Directors by simply signing your name below and returning this
card.
The undersigned, being a stockholder of PFS Bancorp, Inc. ("Company") as
of March 15, 2002, hereby authorizes the Board of Directors of the Company or
any successors thereto as proxies with full powers of substitution, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held at the Company's main office, located at Second and Bridgeway
Streets, Aurora, Indiana, on Thursday, April 25, 2002 at 3:00 p.m., Eastern
Daylight Savings Time, and at any adjournment of said meeting, and thereat to
act with respect to all votes that the undersigned would be entitled to cast,
if then personally present, as follows:
1. ELECTION OF DIRECTORS FOR THREE-YEAR TERM
[ ] FOR all nominees listed below [ ] WITHHOLD [ ] FOR ALL
(except as marked to the EXCEPT
contrary below)
Nominees for three-year term expiring in 2005:
Mel E. Green and Robert L. Laker.
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.
____________________________________
2. PROPOSAL to adopt the PFS Bancorp, Inc. 2002 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to adopt the PFS Bancorp, Inc. 2002 Recognition and Retention
Plan and Trust Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL to ratify the appointment by the Board of Directors of Grant
Thornton LLP as the Company's independent auditors for the fiscal year
ending December 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Shares of the Company's Common Stock will be voted as specified. Unless
otherwise marked, your proxy will be voted for the proposals by simply signing
your name and returning this card. You may revoke this proxy at any time
prior to the time it is voted at the annual meeting.
Date________________________
________________________ _____________________________
Stockholder sign above Co-holder (if any) sign above
____________________________________________________________________________
Detach above card, sign, date and mail in postage paid envelope provided.
PFS BANCORP, INC.
_______________________________________________________________________________
Please sign this proxy exactly as your name(s) appear(s) on this proxy. When
signing in a representative capacity, please give title. When shares are held
jointly, only one holder need sign.
PLEASE MARK, SIGN, DATE AND RETURN
_______________________________________________________________________________