Filed by the
Registrant ☒ Filed by a Party other than the
Registrant ☐
We cordially invite you to attend the Special Meeting of Stockholders of HV Bancorp, Inc. The special meeting will be held at Huntingdon Valley
Bank located at 1388 West Street Road, Warminster, Pennsylvania at 3:00 p.m., local time, on June 13, 2018.
The business to be
conducted at the Special Meeting, as described in the enclosed Notice of Special Meeting and Proxy Statement, is the vote of HV Bancorp, Inc. stockholders to approve the HV Bancorp, Inc. 2018 Equity Incentive Plan.
Our Board of Directors has determined that implementing the 2018 Equity Incentive Plan is in the best interests of HV Bancorp, Inc. and its
stockholders. For the reasons set forth in the Proxy Statement, the Board of Directors unanimously recommends a vote FOR the 2018 Equity Incentive Plan.
It is important that your shares be represented at the special meeting, whether or not you plan to attend personally. Please complete, sign
and date the enclosed proxy card and return it as soon as possible in the postage-paid envelope provided so that your shares will be represented at the special meeting. Alternatively, you may vote through the Internet or by telephone. Information
and applicable deadlines for voting through the Internet or by telephone are set forth in the enclosed proxy card instructions. You may revoke your proxy at any time prior to its exercise, and you may attend the special meeting and vote in person,
even if you have previously returned your proxy card or voted via the Internet or by telephone. However, if you are a stockholder whose shares are not registered in your own name, you will need additional documentation from your record holder to
vote personally at the special meeting.
We thank you for your prompt attention to this matter and appreciate your support.
Notice is hereby given that the Special Meeting of Stockholders of HV Bancorp, Inc. (the Special Meeting) will be held at
Huntingdon Valley Bank located at 1388 West Street Road, Warminster, Pennsylvania, 18974 on June 13, 2018, at 3:00 p.m., local time.
The purpose of the Special Meeting is to consider and act upon the Board of Directors proposal to approve and implement the HV Bancorp,
Inc. 2018 Equity Incentive Plan and such other matters as may properly come before the Special Meeting, or any adjournments thereof. The Board of Directors is not aware of any other business to come before the Special Meeting.
Any action may be taken on the foregoing proposals at the Special Meeting on the date specified above, or on the date or dates to which the
Special Meeting may be adjourned. Stockholders of record at the close of business on May 2, 2018 are the stockholders entitled to vote at the Special Meeting, and any adjournments thereof.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Except as otherwise noted below, holders of record of HV Bancorp, Inc.s shares of common stock, par value $0.01 per share, as of the
close of business on May 2, 2018 are entitled to one vote for each share then held. As of May 2, 2018, there were 2,182,125 shares of common stock issued and outstanding.
Principal Holders
Persons and groups who
beneficially own in excess of 5% of the shares of our common stock are required to file certain reports with the Securities and Exchange Commission regarding such ownership. The following table sets forth, as of May 2, 2018, the shares of
common stock beneficially owned by our directors and executive officers, individually and as a group, and by each person who was known to us as the beneficial owner of more than 5% of the outstanding shares of our common stock. The mailing address
for each of our directors and executive officers is 3501 Masons Mill Road, Suite 401, Huntingdon Valley, Pennsylvania 19006.
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Name and Address of Beneficial Owners
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Amount of Shares
Owned and Nature
of Beneficial
Ownership
(1
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Percent of
Shares
of Common
Stock
Outstanding
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Five Percent Stockholders
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Lawrence B. Seidman
100 Lanidex Plaza, 1st Floor
Parsippany, New Jersey 07054
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175,090
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(2)
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8.0
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%
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Huntingdon Valley Bank
Employee Stock Ownership Plan Trust
Trustee: Community Bank of Pleasant Hill, dba First Trust of MidAmerica
1901 Frederic Avenue, Suite 100
St. Joseph, Missouri 64501
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174,570
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(3)
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8.0
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%
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Directors and Executive Officers
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Carl Asplundh, III, Director
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*
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Joseph F. Kelly, Director
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30,000
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1.4
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John D. Behm, Director
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30,000
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(4)
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1.4
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Travis J. Thompson, Chairman, President and Chief Executive Officer
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25,806
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(5)
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1.2
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Scott W. Froggatt, Director
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20,974
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(6)
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*
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J. Chris Jacobsen, Executive Vice President and Chief Operating Officer
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13,592
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(7)
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*
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Joseph C. ONeill, Jr., Executive Vice President and Chief Financial Officer
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15,805
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(8)
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*
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Charles S. Hutt, Executive Vice President and Chief Credit Officer
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13,972
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(9)
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*
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All directors and executive officers as a group (8 persons)
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150,149
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6.9
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%
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(1)
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In accordance with Rule
13d-3
under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of any shares of common stock if
he or she has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined. As used herein, voting
power is the power to vote or direct the voting of shares and investment power is the power to dispose or direct the disposition of shares, and includes all shares held directly as well as by spouses and minor children, in trust
and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting or investment power.
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(2)
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On a Schedule 13D/A filed with the Securities and Exchange Commission on September 12, 2017, Seidman and Associates, L.L.C. reported sole dispositive and voting power with respect to 26,934 shares of our common
stock; Seidman Investment Partnership, L.P. reported sole dispositive and voting power with respect to 25,314 shares of our common stock; Seidman Investment Partnership II, L.P. reported sole dispositive and voting power with respect to 35,050
shares of our common stock; Seidman Investment Partnership III, L.P. reported sole dispositive and voting power with respect to 12,500 shares of our common stock;
LSBK06-08,
L.L.C. reported sole dispositive
and voting power with respect to 19,345 shares of our common stock; Broad Park Investors, L.L.C. reported sole dispositive and voting power with respect to 22,812 shares of our common stock; Chewy Gooey Cookies, L.P. reported sole dispositive and
voting power with respect to 12,500 shares of our common stock; CBPS, LLC reported sole dispositive and voting power with respect to 20,635 shares of our common stock; Veteri Place Corporation reported sole dispositive and voting power with respect
to 100,344 shares of our common stock; JBRC I, LLC reported sole dispositive and voting power with respect to 12,500 shares of our common stock; and Lawrence B. Seidman reported sole dispositive and voting power with respect to 175,090 shares of our
common stock.
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(3)
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On a Schedule 13G filed with the Securities and Exchange Commission on February 12, 2018, the ESOP Trustee reported sole dispositive power over 174,570 shares and sole voting power with respect to 165,842 shares
and shared voting power with respect to 8,728 shares of our common stock
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(4)
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Includes 30,000 shares held in a living trust.
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(5)
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Includes 261 shares held in Mr. Thompsons 401(k) account and 545 shares allocated to Mr. Thompsons ESOP account.
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(6)
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Includes 20,974 shares held in Mr. Froggatts individual retirement account.
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(7)
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Includes 1,111 shares held in Mr. Jacobsens 401(k) account and 181 shares allocated to Mr. Jacobsens ESOP account.
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(8)
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Includes 13,680 shares held in Mr. ONeills 401(k) account and 353 shares allocated to Mr. ONeills ESOP account.
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(9)
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Includes 8,627 shares held in Mr. Hutts 401(k) account, 545 shares allocated to Mr. Hutts ESOP account and 5,000 shares that have been pledged as security for a loan.
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Quorum
The presence in person or by proxy of a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum
at the Special Meeting. Abstentions and broker
non-votes
will be counted for purposes of determining that a quorum is present.
Limitations on Voting
In accordance with
the provisions of our Articles of Incorporation, record holders of common stock who beneficially own in excess of 10% of the outstanding shares of our common stock are not entitled to vote any shares held in excess of such limit.
Method of Counting Votes
As to the
approval of the HV Bancorp, Inc. 2018 Equity Incentive Plan, a stockholder may: (i) vote FOR the approval; (ii) vote AGAINST the approval; or (iii) ABSTAIN from voting on such matter. The affirmative vote of a majority of the votes
cast at the Special Meeting, without regard to either broker
non-votes
or abstentions, is required for the approval of this matter.
Participants in the ESOP and 401(k) Plan
Participants in the Huntingdon Valley Bank Employee Stock Ownership Plan (the ESOP) will each receive a Vote Instruction Form that
reflects all shares that the participant may direct the trustee to vote on his or her behalf under the plan. Under the terms of the ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP participant may direct the trustee how to
vote the shares of HV Bancorp, Inc. common stock allocated to his or her account. The ESOP trustee will vote all unallocated shares of HV Bancorp, Inc. common stock held by the ESOP and allocated shares for which no voting instructions are received
in the same proportion as shares for which it has received timely voting instructions. In addition, participants in the Huntingdon Valley Bank Employees Savings Plan (401(k) Plan) with an interest in the HV Bancorp, Inc. Stock Fund
(Stock Fund) will receive a Vote Instruction Form that allows them to direct the 401(k) Plan trustee to vote their interest in the Stock Fund. If a participant does not direct the 401(k) Plan trustee how to vote his or her interest in
the Stock Fund, the trustee will vote such interest in the same proportion as it has received voting instructions from other 401(k) Plan participants.
The deadline for returning your ESOP Vote Instruction Form and/or 401(k) Vote Instruction Form
is June
10, 2018 at 11:59 p.m. local time.
PROPOSAL APPROVAL OF THE HV BANCORP, INC.
2018 EQUITY INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the HV Bancorp, Inc. 2018 Equity Incentive Plan (the 2018 Equity
Incentive Plan), to provide officers, employees and directors of HV Bancorp, Inc. and Huntingdon Valley Bank with additional incentives to promote the growth and performance of HV Bancorp, Inc. and Huntingdon Valley Bank. The Board of
Directors and the Compensation Committee believe that the adoption of the 2018 Equity Incentive Plan is in the best interests of HV Bancorp, Inc. and its stockholders as such plan will provide Huntingdon Valley Bank with the ability to retain and
reward and, to the extent necessary, attract and incentivize its employees, officers, directors and other service providers to promote growth, improve performance and further align their interests with those of HV Bancorp, Inc.s stockholders
through the ownership of additional common stock of HV Bancorp, Inc.
Why We Are Seeking Approval of the 2018 Equity Incentive Plan
Many companies that we compete with for directors and management-level employees are public companies that offer equity compensation as part of
their overall director and officer compensation programs. By approving the 2018 Equity Incentive Plan, our stockholders will give us the flexibility we need to continue to attract
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and retain highly qualified officers and directors by offering a competitive compensation program that is linked to the performance of our common stock. In addition, the 2018 Equity Incentive
Plan is intended to further align the interests of our directors and management with the interests of our stockholders by potentially increasing the ownership interests of directors and officers in the common stock of HV Bancorp, Inc.
We completed our
mutual-to-stock
conversion and related public
stock offering on January 11, 2017, raising approximately $21.8 million in gross proceeds. The substantial majority of all financial institutions have adopted equity-based incentive plans following their
mutual-to-stock
conversion transactions. We note that our prospectus made clear that we intended to adopt an equity incentive plan, described the regulatory requirements applicable to such plan and we
included the pro forma effect of awards made under such plan.
Highlights of the 2018 Equity Incentive Plan
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Share Reserve and Terms Generally Consistent with Industry Standards
. In determining the size and terms of the 2018 Equity Incentive Plan, the Board of Directors and Compensation Committee considered a number of
factors, including: (1) industry practices related to the adoption of equity-incentive plans by financial institutions following a
mutual-to-stock
conversion; and
(2) applicable regulations related to the adoption of equity-incentive plans by converted financial institutions. In this regard (and as described below), the maximum number of shares of common stock that may delivered pursuant to the exercise
of stock options is 10% of the number of shares of common stock sold in our offering, and the maximum number of shares of common stock that may be issued as restricted stock and restricted stock units is 4% of the number of shares of common stock
sold in our offering.
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Minimum Vesting Periods for Awards
. Subject to limited exceptions in the event of death, disability or involuntary termination without cause following a change in control, the 2018 Equity Incentive Plan requires
that awards may not vest more rapidly than in equal installments over a period of three years, with the initial installment vesting no earlier than the
one-year
anniversary of the date of grant.
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Limits on Grants to Directors and Employees
. The maximum number of shares of common stock, in the aggregate, that may be delivered to any one
non-employee
director
pursuant to the exercise of stock options and pursuant to restricted stock awards or restricted stock units under the 2018 Equity Incentive Plan is 5% (30% in the aggregate for all
non-employee
directors) of
the shares available for grant or award, respectively. The maximum number of shares of common stock that may be delivered to any one employee pursuant to the exercise of stock options and pursuant to restricted stock awards or restricted stock units
is 25% of the shares available for grant or award, respectively, under the 2018 Equity Incentive Plan.
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Share Counting
. The 2018 Equity Incentive Plan provides that, if an award is forfeited or expires, the shares covered by the award will be available for future grant, while shares withheld to cover taxes or used
to pay the exercise price of stock options will not be available for future grant.
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No Repricing
. The 2018 Equity Incentive Plan prohibits repricing and exchange of underwater options for cash or shares without stockholder approval.
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No Single-Trigger Vesting of Time-Based Awards.
The 2018 Equity Incentive Plan does not provide for vesting of time-based equity awards based solely on the occurrence of a change in control, without an
accompanying involuntary termination of service (including a termination for good reason).
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General
The following is a summary of the material features of the 2018 Equity Incentive Plan, which is qualified in its entirety by reference to the
provisions of the 2018 Equity Incentive Plan, attached hereto as Appendix A. In the event of conflict between the terms of this disclosure and the terms of the 2018 Equity Incentive Plan, the terms of the 2018 Equity Incentive Plan will
control.
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Subject to permitted adjustments for certain corporate transactions, the 2018 Equity Incentive
Plan authorizes the issuance or delivery to participants of up to 305,497 shares of HV Bancorp, Inc. common stock pursuant to grants of incentive and
non-qualified
stock options, restricted stock awards and
restricted stock units. Of this number, the maximum number of shares of HV Bancorp, Inc. common stock that may be issued under the 2018 Equity Incentive Plan pursuant to the exercise of stock options is 218,212 shares, and the maximum number of
shares of HV Bancorp, Inc. common stock that may be issued as restricted stock awards or restricted stock units is 87,285 shares. These amounts represent 10% and 4%, respectively, of the shares of HV Bancorp, Inc. common stock that were sold in
connection with the
mutual-to-stock
conversion of Huntingdon Valley Bank and initial public offering of HV Bancorp, Inc. that was consummated on January 11, 2017.
The 2018 Equity Incentive Plan will be administered by the members of the Compensation Committee (the Committee) who are
Disinterested Board Members, as defined in the 2018 Equity Incentive Plan. The Committee has full and exclusive power within the limitations set forth in the 2018 Equity Incentive Plan to make all decisions and determinations regarding:
(1) the selection of participants and the granting of awards; (2) establishing the terms and conditions relating to each award; (3) adopting rules, regulations and guidelines for carrying out the 2018 Equity Incentive Plans
purposes; and (4) interpreting the provisions of the 2018 Equity Incentive Plan and any award agreement. The 2018 Equity Incentive Plan also permits the Committee to delegate all or part of its responsibilities and powers to any person or
persons selected by it.
Except for accelerating the vesting of awards to avoid the minimum requirements specified in the plan or
accelerating the vesting requirements applicable to an award as a result of or in connection with a change in control, the Compensation Committee has the authority to reduce, eliminate or accelerate any restrictions or vesting requirements
applicable to an award at any time after the grant of the award or to extend the time period to exercise a stock option, provided that such extension is consistent with Section 409A of the Internal Revenue Code.
Eligibility
Each employee or director of
HV Bancorp, Inc. or any subsidiary is eligible to receive awards under the 2018 Equity Incentive Plan, except that
non-employees
may not be granted incentive stock options.
Types of Awards
The Committee may
determine the type and terms and conditions of awards under the 2018 Equity Incentive Plan, which will be set forth in an award agreement delivered to each participant. Awards may be granted as incentive and
non-qualified
stock options, restricted stock awards, restricted stock units or any combination thereof, as follows.
Stock Options
.
A stock option gives the recipient or optionee the right to purchase shares of common
stock at a specified price for a specified period of time. The exercise price may not be less than the fair market value on the date the stock option is granted. Fair market value for purposes of the 2018 Equity Incentive Plan means the final sales
price of HV Bancorp, Inc.s common stock as reported on any national securities exchange on which the common stock may from time to time be listed or traded on the date the option is granted, or if HV Bancorp, Inc.s common stock was not
traded on such date, then on the day prior to such date or on the next preceding day on which HV Bancorp, Inc.s common stock was traded, and without regard to after-hours trading activity. The Committee will determine the fair market value, in
accordance with Section 422 of the Internal Revenue Code and applicable requirements of Section 409A of the Internal Revenue Code, if it cannot be determined in the manner described herein. Further, the Committee may not grant a stock
option with a term that is longer than 10 years.
Stock options are either incentive stock options or
non-qualified
stock options. Incentive stock options have certain tax advantages and must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are eligible to
receive incentive stock options. Shares of common stock purchased upon the exercise of a stock option must be paid for in full at the time of exercise: (1) either in cash or with stock valued at fair market value as of the day of exercise;
(2) by a cashless exercise through a third party; (3) by a net settlement of the stock option using a portion of the shares obtained on exercise in payment of the exercise price of the stock option; (4) by personal,
certified or cashiers check; (5) by other property deemed acceptable by the Committee; or (6) by a combination of the foregoing. Stock options are subject to vesting conditions and restrictions as determined by the Committee.
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Restricted Stock
.
A restricted stock award is a grant of common stock,
subject to vesting requirements, to a participant for no consideration or minimum consideration as may be required by applicable law. Restricted stock awards under the 2018 Equity Incentive Plan will be granted only in whole shares of common stock
and are subject to vesting conditions and other restrictions established by the Committee as set forth in the 2018 Equity Incentive Plan or the award agreement. Awards will be evidenced by award agreements approved by the Committee, which set forth
the terms and conditions of each award. Prior to their vesting, unless otherwise determined by the Committee, the recipient of a restricted stock award may exercise any voting rights with respect to common stock subject to an award and receive any
dividends and distributions with respect to the common stock.
Restricted Stock Units
. Restricted stock units are similar to
restricted stock awards in that the value of a restricted stock unit is denominated in shares of stock. However, unlike a restricted stock award, no shares of stock are transferred to the participant until certain requirements or conditions
associated with the award are satisfied. The limitation on the number of restricted stock awards available described in the paragraph above is also applicable to restricted stock units.
Limitations on Awards Under the 2018 Equity Incentive Plan
The following limits apply to awards under the 2018 Equity Incentive Plan:
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The maximum number of shares of common stock that may be available for awards under the 2018 Equity Incentive Plan is 305,497 shares, of which up to 218,212 shares of common stock may be delivered pursuant to the
exercise of stock options and 87,285 shares of common stock may be issued pursuant to restricted stock awards or restricted stock units.
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The maximum number of shares of common stock that may be delivered to any one employee pursuant to the exercise of stock options and pursuant to restricted stock awards or restricted stock units is 54,553 shares and
21,821 shares, respectively (all of which may be granted in any one calendar year). Such maximum amount represents 25% of the maximum number of shares of common stock that may be delivered pursuant to the exercise of stock options and 25% of the
number of shares of common stock that may be issued pursuant to restricted stock awards or restricted stock units.
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The maximum number of shares of common stock that may be delivered to any one
non-employee
director pursuant to the exercise of stock options and the issuance of restricted stock
awards or restricted stock units is 10,910 shares and 4,364 shares, respectively (all of which may be granted in any one calendar year). Such maximum amount represents 5% of the maximum number of shares of common stock that may be delivered pursuant
to the exercise of stock options and 5% of the maximum number of shares of common stock that may be issued pursuant to restricted stock awards or restricted stock units.
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The maximum number of shares of common stock that may be delivered to all
non-employee
directors, in the aggregate, pursuant to the exercise of stock options and the issuance of
restricted stock awards or restricted stock units is 65,463 shares and 26,185 shares, respectively (all of which may be granted in any one calendar year). Such maximum amount represents 30% of the maximum number of shares of common stock that may be
delivered pursuant to the exercise of stock options and 30% of the maximum number of shares of common stock that may be issued pursuant to restricted stock awards or restricted stock units.
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In the event of a corporate transaction involving the stock of HV Bancorp, Inc. (including, without limitation, any stock dividend, stock
split or other special and nonrecurring dividend or distribution, recapitalization, reorganization, merger, consolidation,
spin-off,
combination or exchange of shares), the Committee will, in an equitable
manner, adjust the number and kind of securities deemed to be available for grants of stock options, restricted stock awards or restricted stock units, the number and kind of securities that may be delivered or deliverable with respect to
outstanding stock options, restricted stock awards and restricted stock units, and the exercise price of stock options.
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In addition, the Committee is authorized to make adjustments to the terms and conditions of stock
options, restricted stock awards and restricted stock units.
Prohibition Against Repricing of Options
. The 2018 Equity
Incentive Plan provides that neither the Committee nor the Board is authorized to make any adjustment or amendment that reduces or would have the effect of reducing the exercise price of a stock option that has been previously granted.
Prohibition on Transfer
. Generally, all awards, except
non-qualified
stock options,
granted under the 2018 Equity Incentive Plan will be nontransferable except by will or in accordance with the laws of intestate succession. Restricted stock awards may be transferable pursuant to a qualified domestic relations order. At the
Committees sole discretion,
non-qualified
stock options may be transferred for valid estate planning purposes that are permitted by the Internal Revenue Code and federal securities laws. During the life
of the participant, awards can be exercised only by the participant. The Committee may permit a participant to designate a beneficiary to exercise or receive any rights that may exist under the 2018 Equity Incentive Plan upon the participants
death.
Performance Measures
The performance measures that may be used for such awards will be based on any one or more of the following performance measures,
as selected by the Committee: book value or tangible book value per share; basic earnings per share; basic cash earnings per share; diluted earnings per share; diluted cash earnings per share; return on equity; net income or net income before taxes;
cash earnings; net interest income;
non-interest
income;
non-interest
expense to average assets ratio; cash general and administrative expense to average assets ratio;
efficiency ratio; cash efficiency ratio; return on average assets; cash return on average assets; return on average stockholders equity; cash return on average stockholders equity; return on average tangible stockholders equity;
cash return on average tangible stockholders equity; core earnings; operating income; operating efficiency ratio; net interest rate margin or net interest rate spread; growth in assets, loans, or deposits; loan production volume;
non-performing
loans; cash flow; strategic business objectives consisting of one or more objectives based upon meeting specified cost targets, business expansion goals, and goals relating to acquisitions or
divestitures, or goals relating to capital raising and capital management; any other measure determined by the Committee or any combination of the foregoing performance measures.
Performance measures may be based on the performance of HV Bancorp, Inc. as a whole or of any one or more subsidiaries or business units of HV
Bancorp, Inc. or a subsidiary, may be measured relative to a peer group, an index or a business plan and may be considered as absolute measures or changes in measures. In establishing the performance measures, the Committee may provide for the
inclusion or exclusion of certain items. The Committee has determined that the awards described below will only be subject to a time-based vesting condition and no specific performance measures.
Vesting of Awards
The Committee will
specify the vesting schedule or conditions of each award. Unless the Committee specifies a different vesting schedule at the time of grant, awards under the 2018 Equity Incentive Plan, other than performance awards, must be granted with a vesting
rate not exceeding 20% per year. If the vesting of an award under the 2018 Equity Incentive Plan is conditioned on the completion of a specified period of service with HV Bancorp, Inc. or its subsidiaries, without the achievement of performance
measures or objectives, then the required period of service for full vesting will be determined by the Committee and evidenced in an award agreement. Notwithstanding anything to the contrary in the 2018 Equity Incentive Plan, awards under the plan
may not vest more rapidly than in equal installments over a period of three years, with the initial installment vesting no earlier than the
one-year
anniversary of the date of grant, unless accelerated due to
death, disability or involuntary termination of employment or service following a change in control. Vesting may be accelerated in the event of death, disability, or upon involuntary termination of employment or service following a change in control
or, subject to the foregoing requirements, at the discretion of the Committee, including due to retirement.
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Change in Control
Unless otherwise stated in an award agreement, at the time of an involuntary termination of employment or service following a change in
control, all stock options then held by the participant will become fully earned and exercisable (subject to the expiration provisions otherwise applicable to the stock option). All stock options may be exercised for a period of one year following
the participants involuntary termination, provided, however, that no stock option will be eligible for treatment as an incentive stock option in the event such stock option is exercised more than three months following involuntary termination
following a change in control. At the time of an involuntary termination of employment or service following a change in control, all awards of restricted stock and restricted stock units will become fully earned and vested immediately. In the event
of a change in control, any performance measure attached to a performance award under the 2018 Equity Incentive Plan will be deemed satisfied at the target level as of the date of the change in control, unless data supports and the
Committee certifies that the performance measures have been achieved at a higher level than target as of the effective date of the change in control, in which case, the performance award will vest at such higher level.
Amendment and Termination
The Board of
Directors may, at any time, amend or terminate the 2018 Equity Incentive Plan or any award granted under the 2018 Equity Incentive Plan, provided that, except as provided in the 2018 Equity Incentive Plan, no amendment or termination may adversely
impair the rights of a participant or beneficiary under an award without the participants (or affected beneficiarys) written consent. The Board of Directors may not amend the 2018 Equity Incentive Plan to materially increase the benefits
accruing to participants under the plan, materially increase the aggregate number of securities that may be issued under the 2018 Equity Incentive Plan (other than as provided in the 2018 Equity Incentive Plan), or materially modify the requirements
for participation in the 2018 Equity Incentive Plan, without approval of stockholders. Notwithstanding the foregoing, the Committee may amend the 2018 Equity Incentive Plan or any award agreement, to take effect retroactively or otherwise, to
conform the 2018 Equity Incentive Plan or the award agreement to current or future law or to avoid an accounting treatment resulting from an accounting pronouncement or interpretation issued by the Securities and Exchange Commission or Financial
Accounting Standards Board subsequent to the adoption of the 2018 Equity Incentive Plan, or the making of the award affected thereby, which, in the sole discretion of the Committee, may materially and adversely affect the financial condition or
results of operations of HV Bancorp, Inc.
Duration of Plan
The 2018 Equity Incentive Plan will become effective upon approval by the stockholders at this meeting. The 2018 Equity Incentive Plan will
remain in effect as long as any awards under it are outstanding; however, no awards may be granted under the 2018 Equity Incentive Plan on or after the
10-year
anniversary of the effective date of the 2018
Equity Incentive Plan. At any time, the Board of Directors may terminate the 2018 Equity Incentive Plan. However, any termination of the 2018 Equity Incentive Plan will not affect outstanding awards.
Federal Income Tax Considerations
The
following is a summary of the federal income tax consequences that may arise in conjunction with participation in the 2018 Equity Incentive Plan.
Non-Qualified
Stock Options
. The grant of a
non-qualified
option will not result in taxable income to the participant. Except as described below, the participant will realize ordinary income at the time of exercise in an amount equal to the excess of
the fair market value of the shares acquired over the exercise price for those shares, and HV Bancorp, Inc. will be entitled to a corresponding deduction for tax purposes. Gains or losses realized by the participant upon disposition of such shares
will be treated as capital gains and losses, with the cost basis in such shares equal to the fair market value of the shares at the time of exercise.
Incentive Stock Options
. The grant of an incentive stock option will not result in taxable income to the participant. The
exercise of an incentive stock option also will not result in taxable income to the participant provided the participant was, without a break in service, an employee of HV Bancorp, Inc. or a subsidiary during the period beginning on the date of the
grant of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled, as that term is defined in the Internal Revenue Code).
8
The excess of the fair market value of the shares at the time of the exercise of an incentive
stock option over the exercise price is an adjustment that is included in the calculation of the participants alternative minimum taxable income for the tax year in which the incentive stock option is exercised. For purposes of determining the
participants alternative minimum tax liability for the year of disposition of the shares acquired pursuant to the incentive stock option exercise, the participant will have a basis in those shares equal to the fair market value of the shares
at the time of exercise.
If the participant does not sell or otherwise dispose of the shares within two years from the date of the grant
of the incentive stock option or within one year after the exercise of such stock option, then, upon disposition of such shares, any amount realized in excess of the exercise price will be taxed as a capital gain. A capital loss will be recognized
to the extent that the amount realized is less than the exercise price.
If the foregoing holding period requirements are not met, the
participant will generally realize ordinary income at the time of the disposition of the shares, in an amount equal to the lesser of: (1) the excess of the fair market value of the shares on the date of exercise over the exercise price; or
(2) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and HV Bancorp, Inc., Inc. will be entitled to a corresponding deduction. If the amount realized exceeds the value of the shares on the date
of exercise, any additional amount will be a capital gain. If the amount realized is less than the exercise price, the participant will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the
amount realized upon the disposition of the shares.
Restricted Stock
. A participant who has been granted a restricted stock
award will not realize taxable income at the time of grant, provided that the stock subject to the award is not delivered at the time of grant, or if the stock is delivered, it is subject to restrictions that constitute a substantial risk of
forfeiture for federal income tax purposes. Upon the later of delivery or vesting of shares subject to an award, the holder will realize ordinary income in an amount equal to the then fair market value of those shares and HV Bancorp, Inc. will
be entitled to a corresponding deduction for tax purposes. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the
shares at the time of delivery or vesting. Dividends paid to the holder during the restriction period, if so provided, will also be compensation income to the participant, and HV Bancorp, Inc. will be entitled to a corresponding deduction for tax
purposes. A participant who makes an election under Section 83(b) of the Internal Revenue Code will include the full fair market value of the restricted stock award in taxable income in the year of grant at the grant date fair market value.
Restricted Stock Unit
. A participant who has been granted a restricted stock unit will not realize taxable income as long
as the award remains in the form of a restricted stock unit. When the restricted stock unit is extinguished and a stock award is issued, the tax consequences for restricted stock awards (see paragraph above) will be realized. A restricted stock unit
does not have voting rights or dividend rights. Since no stock is transferred to the participant on the grant date of the restricted stock unit, an election to have the restricted stock unit taxed at the grant date cannot be made since
Section 83(b) of the Internal Revenue Code requires a transfer of stock.
Withholding of Taxes
. HV Bancorp, Inc. may
withhold amounts from participants to satisfy withholding tax requirements. Except as otherwise provided by the Committee, participants may have shares withheld from awards to satisfy the minimum tax withholding requirements or an amount up to the
participants highest marginal tax rate required for federal, state and local tax withholding, provided such withholding does not trigger adverse accounting consequences.
Change in Control
. Any acceleration of the vesting or payment of awards under the 2018 Equity Incentive Plan in the event of a
change in control or termination of employment or service following a change in control may cause part or all of the consideration involved to be treated as an excess parachute payment under Section 280G of the Internal Revenue
Code, which may subject the participant to a 20% excise tax and preclude deduction by HV Bancorp, Inc. related to the awards.
9
Deduction Limits
. Section 162(m) of the Internal Revenue Code generally limits
our ability to deduct for tax purposes compensation in excess of $1.0 million per year for each of our chief executive officer and other executive officers named in the summary compensation table (each, a covered employee) of our
annual proxy statement, as well as any employee who has been designated a covered employee for any fiscal year beginning after December 31, 2016. Compensation resulting from awards under the 2018 Equity Incentive Plan will be counted toward the
$1.0 million limit.
Tax Advice
. The preceding discussion is based on federal tax laws and regulations currently in
effect, which are subject to change, and the discussion does not purport to be a complete description of the federal income tax aspects of the 2018 Equity Incentive Plan. A participant may also be subject to state and local taxes in connection
with the grant of awards under the 2018 Equity Incentive Plan. HV Bancorp, Inc. suggests that participants consult with their individual tax advisors to determine the applicability of the tax rules to the awards granted to them in their
personal circumstances.
Accounting Treatment
Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, HV Bancorp, Inc.
is required to recognize compensation expense on its income statement over the requisite service period or performance period based on the grant date fair value of stock options and other equity-based compensation (such as restricted stock).
Awards to be Granted
As soon as
practicable following the receipt of stockholder approval of the 2018 Equity Incentive Plan, the Compensation Committee will grant stock options and restricted stock awards to the employees and
non-employee
directors as follows, with such awards conditioned upon the receipt of stockholder approval of the 2018 Equity Incentive Plan:
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
Named and Position
|
|
Dollar Value
($)
(1)
|
|
|
Number of Awards
|
|
Travis J. Thompson
President and Chief Executive Officer
|
|
|
298,200
|
|
|
|
20,000
|
|
Joseph C. ONeill, Jr.
Executive Vice President and Chief Financial Officer
|
|
|
149,100
|
|
|
|
10,000
|
|
Charles S. Hutt
Executive Vice President and Chief Credit Officer
|
|
|
149,100
|
|
|
|
10,000
|
|
J. Chris Jacobsen
Executive Vice President and Chief Operating Officer
|
|
|
149,100
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Executive Officers as a Group
|
|
|
745,500
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Non-Employee
Directors as a Group (4 persons)
(2)
|
|
|
223,650
|
|
|
|
15,000
|
|
Non-Executive
Officers as a Group (4 persons)
|
|
|
178,920
|
|
|
|
12,000
|
|
(1)
|
Amounts are based on the fair market value of HV Bancorp, Inc. common stock on May 2, 2018 of $14.91 per share. The actual value of the awards is not determinable since their value will depend upon the fair market
value of HV Bancorp, Inc. common stock on the date of grant.
|
(2)
|
Each
non-employee
director who has been a member of the Board for at least one year would be awarded 5,000 restricted stock awards.
|
10
|
|
|
|
|
|
|
|
|
Stock Option Awards
|
|
Named and Position
|
|
Dollar Value
($)
(1)
|
|
|
Number of Awards
|
|
Travis J. Thompson
President and Chief Executive Officer
|
|
|
|
|
|
|
50,000
|
|
Joseph C. ONeill, Jr.
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
25,000
|
|
Charles S. Hutt
Executive Vice President and Chief Credit Officer
|
|
|
|
|
|
|
25,000
|
|
J. Chris Jacobsen
Executive Vice President and Chief Operating Officer
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Total Executive Officers as a Group
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
Non-Employee
Directors as a Group (4 persons)
(2)
|
|
|
|
|
|
|
30,000
|
|
Non-Executive
Officers as a Group (7 persons)
|
|
|
|
|
|
|
43,000
|
|
(1)
|
Amounts are not determinable, as the actual value of the stock options realized will depend on the extent to which the market value of HV Bancorp, Inc. common stock exceeds the exercise price of the stock option on the
date of exercise.
|
(2)
|
Each
non-employee
director who has been a member of the Board for at least one year would be awarded 10,000 stock options.
|
It is expected that the stock option and restricted stock awards will vest over a seven-year period, with 16 percent becoming vested
after the completion of one year of service following the date of grant and then 14 percent becoming vested each year of continued service thereafter for the next six years. The exercise price of the stock options will equal the fair market
value of HV Bancorp, Inc. common stock on the actual date of grant. Notwithstanding the foregoing, these awards would vest upon death, disability or involuntary termination of employment following a change in control. The time-based component of the
awards serves as a retention tool for the employees and directors, and the stock options are viewed by the Compensation Committee as performance-based because value is only realized if there is stock price appreciation over the term of the options.
The Compensation Committee engaged The Galbreath Group, an independent compensation consultant, to assess the Compensation
Committees recommendations for granting stock options and restricted stock to the employees and directors. Particularly for the Named Executive Officers and Directors, the Compensation Committee considered each persons role and position
in determining the amount of stock options and restricted stock awards to be received. The Compensation Committee also considered their past contributions, their individual roles in completing the
mutual-to-stock
conversion in 2017 and the roles they would play in the future. The Compensation Committee also reviewed survey data regarding awards made to executive officers and directors of other
financial institutions that had undertaken a
mutual-to-stock
conversion and related stock offering. The Galbreath Group concluded that the Compensation Committees
recommendations for the proposed awards are reasonable and intended to align the economic interest of the employees and directors with that of other stockholders, consistent with prevailing compensation practices in the competitive marketplace for
similarly-situated financial institutions.
Any future grants to employees and directors under the 2018 Equity Incentive Plan will be
determined in the discretion of the Compensation Committee.
Clawback Policy
The 2018 Equity Incentive Plan provides that if HV Bancorp, Inc. is required to prepare an accounting restatement due to its material
noncompliance, as a result of misconduct, with any financial reporting requirement under the federal securities laws, any participant who is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or who is subject
to clawback under Section 954 of the Dodd-Frank Act must reimburse HV Bancorp, Inc. with the required amount of any payment in settlement of an award earned or accrued during the
12-month
period following
the first public issuance or filing with the Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement. In addition, awards granted under the 2018 Equity Incentive Plan are
subject to any clawback policy adopted by the Board of Directors.
11
Required Vote and Recommendation of the Board
In order to approve the 2018 Equity Incentive Plan, the proposal must receive the affirmative vote of a majority of the votes cast, either in
person or by proxy, at the Special Meeting, without regard to broker
non-votes
or proxies marked ABSTAIN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2018
EQUITY INCENTIVE PLAN
OTHER MATTERS
The Board of Directors is not aware of any business to come before the Special Meeting other than the matters described above in the Proxy
Statement. However, if any matters should properly come before the Special Meeting, it is intended that the Board of Directors, as holders of the proxies, will act as determined by a majority vote.
MISCELLANEOUS
The cost
of solicitation of proxies will be borne by HV Bancorp, Inc. HV Bancorp, Inc. will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners
of common stock. In addition to solicitations by mail, directors, officers and regular employees of HV Bancorp, Inc. may solicit proxies personally or by telephone without additional compensation. We have retained Laurel Hill Advisory Group, LLC to
assist us in soliciting proxies, and have agreed to pay Laurel Hill Advisory Group, LLC a fee of $6,000 plus reasonable expenses for these services.
|
BY ORDER OF THE BOARD OF DIRECTORS
|
|
Janice Garner
Corporate Secretary
|
Huntingdon Valley, Pennsylvania
May 9, 2018
16
APPENDIX A
HV BANCORP, INC.
2018
EQUITY INCENTIVE PLAN
ARTICLE 1 GENERAL
Section
1.1
Purpose, Effective Date and Term
. The purpose of the HV Bancorp, Inc. 2018 Equity
Incentive Plan (the
Plan
) is to promote the long-term financial success of HV Bancorp, Inc. (the
Company
), and its Subsidiaries, including Huntingdon Valley Bank (the
Bank
), by providing a
means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Companys stockholders through the ownership of additional common stock of the Company. The
Effective
Date
of the Plan shall be the date the Plan satisfies the applicable stockholder approval requirements. The Plan shall remain in effect as long as any Awards are outstanding;
provided, however,
that no Awards may be granted
under the Plan after the day immediately prior to the
ten-year
anniversary of the Effective Date.
Section
1.2
Administration
. The Plan shall be administered by the Compensation Committee of the
Companys Board of Directors (the
Committee
), in accordance with Section 5.1.
Section
1.3
Participation
. Each Employee or Director of the Company or any Subsidiary of the
Company who is granted an Award in accordance with the terms of the Plan shall be a
Participant
in the Plan. The grant of Awards shall be limited to Employees and Directors of the Company or any Subsidiary.
Section
1.4
Definitions
. Capitalized terms used in this Plan are defined in Article 8 and
elsewhere in this Plan.
ARTICLE 2AWARDS
Section
2.1
General
. Any Award under the Plan may be granted singularly or in combination with
another Award (or Awards). Each Award under the Plan shall be subject to the terms and conditions of the Plan and such additional terms, conditions, limitations and restrictions as the Committee shall provide with respect to such Award and as
evidenced in the Award Agreement. Subject to the provisions of Section 2.8, an Award may be granted as an alternative to or replacement of an existing Award under the Plan or any other plan of the Company or any Subsidiary or as the form
of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or its Subsidiaries, including without limitation the plan of any entity acquired by the Company or any Subsidiary. The types of
Awards that may be granted under the Plan include:
(a)
Stock Options
. A Stock Option means a grant under
Section 2.2 that represents the right to purchase shares of Stock at an Exercise Price established by the Committee. Any Stock Option may be either an Incentive Stock Option (an
ISO
) that is intended to satisfy the
requirements applicable to an Incentive Stock Option described in Code Section 422(b), or a
Non-Qualified
Stock Option (a
Non-Qualified
Option
) that is not intended to be an ISO; provided, however, that no ISOs may be granted: (i) after the day immediately prior to the
ten-year
anniversary of the Effective Date or the date the
Plan is approved by the Board, whichever is earlier; or (ii) to a
non-employee. Unless
otherwise specifically provided by its terms, any Stock Option granted to an Employee under this Plan shall be
an ISO to the maximum extent permitted. Any ISO granted under this Plan that does not qualify as an ISO for any reason (whether at the time of grant or as the result of a subsequent event) shall be deemed to be a
Non-Qualified
Option. In addition, any ISO granted under this Plan may be unilaterally modified by the Committee to disqualify such Stock Option from ISO treatment such that it shall become a
Non-Qualified
Option; provided, however, that any such modification shall be ineffective if it causes the Award to be subject to Code Section 409A (unless, as modified, the Award complies with Code
Section 409A).
(b)
Restricted
Stock Awards.
A Restricted Stock Award means a grant of
shares of Stock under Section 2.3 for no consideration or such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan, subject to a vesting schedule or the satisfaction of
market conditions or performance conditions.
(c)
Restricted Stock Units
. A Restricted Stock Unit means a grant under
Section 2.4 denominated in shares of Stock that is similar to a Restricted Stock Award except no shares of Stock are actually awarded on the date of grant of a Restricted Stock Unit. A Restricted Stock Unit is subject to a vesting schedule or
the satisfaction of market conditions or performance conditions and shall be settled in shares of Stock, provided, however, that in the sole discretion of the Committee, determined at the time of settlement, a Restricted Stock Unit may be settled in
cash based on the Fair Market Value of a share of the Companys Stock multiplied by the number of Restricted Stock Units being settled.
(d)
Performance Awards
. A Performance Award means an Award under Section 2.5 that is granted and will vest upon the achievement of
one or more specified performance measures set forth in Section 2.5.
Section 2.2
Stock
Options
.
(a)
Grant of Stock Options
. Each Stock Option shall be evidenced by an Award Agreement that shall: (i) specify the number of Stock
Options covered by the Award; (ii) specify the date of grant of the Stock Option; (iii) specify the vesting period or conditions to vesting; and (iv) contain such other terms and conditions not inconsistent with the Plan, including
the effect of termination of a Participants employment or Service with the Company as the Committee may, in its discretion, prescribe.
(b)
Terms and Conditions
. A Stock Option shall be exercisable in accordance with such terms and conditions and during such periods as
may be established by the Committee. In no event, however, shall a Stock Option expire later than ten (10) years after the date of its grant (or five (5) years with respect to ISOs granted to an Employee who is a 10% Stockholder). The
Exercise Price of each Stock Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant (or, if greater, the par value of a share of Stock);
provided, however,
that the Exercise Price of
an ISO shall not be less than 110% of Fair Market Value of a share of Stock on the date of grant if granted to a 10% Stockholder;
provided further,
that the Exercise Price may be higher or lower in the case of Stock Options granted or
exchanged in replacement of existing Awards held by an Employee or Director of, or service provider to, an acquired entity. The payment of the Exercise Price of a Stock Option shall be by cash or, subject to limitations imposed by applicable
law, by such other means as the Committee may from time to time permit, including: (i) by tendering, either actually or constructively by attestation, shares of Stock valued at Fair Market Value as of the day of exercise; (ii) by
irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and to remit to the Company a sufficient portion of the sale proceeds to
pay the entire Exercise Price and any tax withholding resulting from such exercise; (iii) by a net settlement of the Stock Option, using a portion of the shares obtained on exercise in payment of the Exercise Price of the Stock Option (and if
applicable, any required tax withholding, to the extent permitted under the Plan); (iv) by personal, certified or cashiers check; (v) by other property deemed acceptable by the Committee; or (vi) by any combination thereof. The total
number of shares that may be acquired upon the exercise of a Stock Option shall be rounded down to the nearest whole share, with
cash-in-lieu
paid by the Company, at its
discretion, for the value of any fractional share.
(c)
Prohibition of Cash
Buy-Outs
of
Underwater Stock Options
. Under no circumstances will any underwater Stock Options which were granted under the Plan be bought back by the Company without stockholder approval.
Section 2.3
Restricted Stock
.
(a)
Grant of Restricted Stock
. Each Restricted Stock Award shall be evidenced by an Award Agreement that shall: (i) specify the
number of shares of Stock covered by the Restricted Stock Award; (ii) specify the date of grant of the Restricted Stock Award; (iii) specify the vesting period; and (iv) contain such other terms and conditions not inconsistent with
the Plan, including the effect of termination of a Participants employment or Service with the Company. All Restricted Stock Awards shall be in the form of issued and outstanding shares of Stock that, at the discretion of the Committee, shall
be either: (x) registered in the name of the Participant and held by or on behalf of the Company, together with a stock power executed by the Participant in favor of the
A-2
Company, pending the vesting or forfeiture of the Restricted Stock; or (y) registered in the name of, and delivered to, the Participant. In any event, the certificates evidencing the
Restricted Stock Award shall at all times prior to the applicable vesting date bear the following legend:
The Stock evidenced hereby is
subject to the terms of an Award Agreement with HV Bancorp, Inc. dated [Date], made pursuant to the terms of the HV Bancorp, Inc. 2018 Equity Incentive Plan, copies of which are on file at the executive offices of HV Bancorp, Inc., and may not be
sold, encumbered, hypothecated or otherwise transferred except in accordance with the terms of such Plan and Award Agreement,
or such other restrictive
legend as the Committee, in its discretion, may specify. Notwithstanding the foregoing, the Company may in its sole discretion issue Restricted Stock in any other approved format (
e.g., electronically
) in order to facilitate the paperless
transfer of such Awards. In the event Restricted Stock is not issued in certificate form, the Company and the transfer agent shall maintain appropriate bookkeeping entries that evidence Participants ownership of such Awards. Restricted Stock
that is not issued in certificate form shall be subject to the same terms and conditions of the Plan as certificated shares, including the restrictions on transferability and the provision of a stock power executed by the Participant in favor of the
Company, until the satisfaction of the conditions to which the Restricted Stock Award is subject.
(b)
Terms and Conditions.
Each Restricted Stock Award shall be subject to the following terms and conditions:
(i)
Dividends.
Unless the Committee determines otherwise with respect to any Restricted Stock Award and specifies such determination in the relevant Award Agreement, any cash dividends or distributions declared with respect to shares of Stock subject to the
Restricted Stock Award shall be immediately distributed to the Participants. Notwithstanding the foregoing, unless the Committee determines otherwise, no dividends shall be distributed with respect to any Restricted Stock Awards subject to
performance-based vesting conditions unless and until the Participant vests in such Restricted Stock Award. Based on the foregoing, if the distribution of cash dividends declared with respect to shares of Stock subject to the Restricted Stock Awards
are delayed, the cash dividends declared will be deferred and distributed to the Participants within two and
one-half
months following the date on which the Restricted Stock Award vests. Any stock dividends
declared on shares of Stock subject to a Restricted Stock Award shall be subject to the same restrictions and shall vest at the same time as the shares of Restricted Stock from which said dividends were derived.
(ii)
Voting Rights.
Unless the Committee determines otherwise with respect to any Restricted Stock Award and
specifies such determination in the relevant Award Agreement, a Participant shall have voting rights related to the unvested,
non-forfeited
Restricted Stock and such voting rights shall be exercised by the
Participant in his or her discretion.
(iii)
Tender Offers and Merger Elections.
Each Participant to whom a
Restricted Stock Award is granted shall have the right to respond, or to direct the response, with respect to the related shares of Restricted Stock, to any tender offer, exchange offer, cash/stock merger consideration election or other offer made
to, or elections made by, the holders of shares of Stock. Such a direction for any such shares of Restricted Stock shall be given by proxy or ballot (if the Participant is the beneficial owner of the shares of Restricted Stock for voting purposes)
or by completing and filing, with the inspector of elections, the trustee or such other person who shall be independent of the Company as the Committee shall designate in the direction (if the Participant is not such a beneficial owner), a written
direction in the form and manner prescribed by the Committee. If no such direction is given, then the shares of Restricted Stock shall not be tendered.
(iv) The Committee may, in connection with the grant of Restricted Stock Awards, condition the vesting thereof upon the
attainment of one or more performance measures set forth in Section 2.5(a). Regardless of whether Restricted Stock Awards are subject to the attainment of one or more performance measures, the Committee may also condition the vesting thereof
upon the continued Service of the Participant. The conditions for grant or vesting and the other provisions of Restricted Stock Awards (including without limitation any applicable performance measures) need not be the same with respect to each
recipient.
A-3
Section
2.4
Restricted Stock Units
.
(a)
Grant of Restricted Stock Unit Awards
. Each Restricted Stock Unit shall be evidenced by an Award Agreement which shall:
(i) specify the number of Restricted Stock Units covered by the Award; (ii) specify the date of grant of the Restricted Stock Units; (iii) specify the vesting period or market conditions or performance conditions that must be
satisfied in order to vest in the Award; and (iv) contain such other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participants employment or Services with the Company. Restricted Stock Unit
Awards shall be paid in shares of Stock, or in the sole discretion of the Committee determined at the time of settlement, in cash or a combination of cash and shares of Stock.
(b)
Terms and Conditions
. Each Restricted Stock Unit Award shall be subject to the following terms and conditions:
(i) A Restricted Stock Unit Award shall be similar to a Restricted Stock Award except that no shares of Stock are actually
awarded to the recipient on the date of grant. Each Restricted Stock Unit shall be evidenced by an Award Agreement that shall specify the Restriction Period (defined below), the number of Restricted Stock Units granted, and such other provisions,
including the effect of termination of a Participants employment or Service with the Company, as the Committee shall determine. The Committee shall impose such other conditions and/or restrictions on any Restricted Stock Unit Award granted
pursuant to the Plan as it may deem advisable, including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Stock Unit, time-based restrictions and vesting following the attainment of performance
measures set forth in Section 2.5(a) hereof, restrictions under applicable laws or under the requirements of any Exchange or market upon which such shares may be listed, or holding requirements or sale restrictions placed by the Company upon
vesting of such Restricted Stock Units.
(ii) The Committee may, in connection with the grant of Restricted Stock Units,
condition the vesting thereof upon the attainment of one or more performance measures set forth in Section 2.5(a) hereof. Regardless of whether Restricted Stock Units are subject to the attainment of one or more performance measures, the
Committee may also condition the vesting thereof upon the continued Service of the Participant. The conditions for grant or vesting and the other provisions of Restricted Stock Units (including without limitation any applicable performance measures)
need not be the same with respect to each recipient. An Award of Restricted Stock Units shall be settled as and when the Restricted Stock Units vest or, in the case of Restricted Stock Units subject to performance measures, after the Committee has
determined that the performance goals have been satisfied.
(iii) Subject to the provisions of the Plan and the applicable
Award Agreement, during the period, if any, set by the Committee, commencing with the date of such Restricted Stock Unit for which such Participants continued Service is required (the
Restriction Period
), and until the later
of (A) the expiration of the Restriction Period and (B) the date the applicable performance measures (if any) are satisfied, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock
Units.
(iv) A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. No
dividends shall be paid on Restricted Stock Units. In the sole discretion of the Committee, exercised at the time of grant, Dividend Equivalent Rights may be paid on Restricted Stock Units. In such case, the Dividend Equivalent Right shall be paid
at the same time as the shares subject to such Restricted Stock Unit are distributed to the Participant.
Section
2.5
Performance Awards
. The vesting of a Performance Award consisting of a Restricted Stock
Award or a Restricted Stock Unit Award may be conditioned on the achievement of one or more objective performance measures set forth in
sub-section
(a) below, as may be determined by the Committee. At the
discretion of the Committee, the vesting of any Stock Option also may be subject to the achievement of one or more objective performance measures.
A-4
(a)
Performance Measures
. The performance measures may be based on any one or more of
the following:
(i) book value or tangible book value per share;
(ii) basic earnings per share;
(iii) basic cash earnings per share;
(iv) diluted earnings per share;
(v) diluted cash earnings per share;
(vi) return on equity;
(vii) net income or net income before taxes;
(viii) cash earnings;
(ix) net interest income;
(x)
non-interest
income;
(xi)
non-interest
expense to average assets ratio;
(xii) cash general and administrative expense to average assets ratio;
(xiii) efficiency ratio;
(xiv) cash efficiency ratio;
(xv) return on average assets;
(xvi) cash return on average assets;
(xvii) return on average stockholders equity;
(xviii) cash return on average stockholders equity;
(xix) return on average tangible stockholders equity;
(xx) cash return on average tangible stockholders equity;
(xxi) core earnings;
(xxii) operating income;
(xxiii) operating efficiency ratio;
(xxiv) net interest rate margin or net interest rate spread;
(xxv) growth in assets, loans, or deposits;
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(xxvi) loan production volume;
(xxvii)
non-performing
loans;
(xxviii) cash flow;
(xxix) strategic business objectives, consisting of one or more objectives based upon meeting specified cost targets, business
expansion goals, and goals relating to acquisitions or divestitures, or goals relating to capital raising and capital management;
(xxx) Any other measure determined by the Committee; or
(xxxi) any combination of the foregoing.
Performance measures may be based on the performance of the Company as a whole or on any one or more Subsidiaries or business units of the
Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan and may be considered as absolute measures or changes in measures. The terms of an Award may provide that partial achievement of performance measures
may result in partial payment or vesting of the award or that the achievement of the performance measures may be measured over more than one period or fiscal year. In establishing any performance measures, the Committee may provide for the exclusion
of the effects of the following items, to the extent the exclusion is set forth in the Participants Award Agreement and identified in the audited financial statements of the Company, including footnotes, or in the Managements Discussion
and Analysis section of the Companys annual report or in the Compensation Discussion and Analysis Section, if any, of the Companys annual proxy statement: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss;
(ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) expenses incurred in connection with a merger, branch acquisition or similar transaction. To the extent
not specifically excluded, such effects shall be included in any applicable performance measure.
(b)
Adjustments
. If the Committee
determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or its Subsidiaries conducts its business or other events or circumstances render current performance
measures to be unsuitable, the Committee may modify such performance measures, in whole or in part, as the Committee deems appropriate. Notwithstanding anything to the contrary herein, performance measures relating to any Award hereunder will be
modified, to the extent applicable, to reflect a change in the outstanding shares of Stock of the Company by reason of any stock dividend or stock split, or a corporate transaction, such as a merger of the Company into another corporation, any
separation of a corporation or any partial or complete liquidation by the Company or a Subsidiary. If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that
the selected performance measures or applicable performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable
performance period; or (ii) cause to be made a cash payment to the Participant in an amount determined by the Committee.
Section
2.6
Vesting of Awards
.
The Committee shall specify the vesting schedule or conditions
of each Award. Unless the Committee specifies a different vesting schedule at the time of grant, Awards under the Plan (other than Performance Awards granted under Section 2.5) shall be granted with a vesting rate not exceeding twenty percent
(20%) per year. Notwithstanding the foregoing sentence, Awards under the Plan shall not vest more rapidly than in equal installments over a period of three years, with the initial installment vesting no earlier than the
one-year
anniversary of the date of grant, unless accelerated pursuant to the terms of the Plan due to death, Disability or Involuntary Termination following a Change in Control. If the right to become vested in an
Award under the Plan (including the right to exercise a Stock Option) is conditioned on the completion of a specified period of Service with the Company or its Subsidiaries, without achievement of performance measures or other performance objectives
being required as a condition of vesting, and without it being granted in lieu of, or in exchange for, other compensation, then the required period of Service for full vesting shall be determined by the Committee and evidenced in the Award Agreement
(subject to acceleration of vesting, to the extent permitted by the Committee or set forth in the Award Agreement, in the event of the Participants death, Disability or Involuntary Termination following a Change in Control).
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Section
2.7
Deferred Compensation
. If any Award would be
considered deferred compensation as defined under Code Section 409A (
Deferred Compensation
), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or
the Award Agreement, without the consent of the Participant, to maintain exemption from, or to comply with, Code Section 409A. Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section shall maintain, to the
extent practicable, the original intent of the applicable provision without violating Code Section 409A. A Participants acceptance of any Award under the Plan constitutes acknowledgement and consent to such rights of the Committee,
without further consideration or action. Any discretionary authority retained by the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an Award which is determined to constitute Deferred
Compensation, if such discretionary authority would contravene Code Section 409A.
Section
2.8
Prohibition Against Option Repricing
. Except for adjustments pursuant to Section 3.4, and reductions of the Exercise Price approved by the Companys stockholders, neither the Committee nor the Board shall have the right
or authority to make any adjustment or amendment that reduces or would have the effect of reducing the Exercise Price of a Stock Option previously granted under the Plan, whether through amendment, cancellation (including cancellation in exchange
for a cash payment in excess of the Stock Options
in-the-money
value or in exchange for Options or other Awards) or replacement grants, or other means.
Section
2.9.
Effect of Termination of Service on Awards
.
The Committee shall establish the
effect of a Termination of Service on the continuation of rights and benefits available under an Award and, in so doing, may make distinctions based upon, among other things, the cause of Termination of Service and type of Award. Unless otherwise
specified by the Committee and set forth in an Award Agreement between the Company and the Participant or as set forth in an employment or severance agreement entered into by and between the Company and/or the Bank and an Employee, the following
provisions shall apply to each Award granted under this Plan:
(a) Upon a Participants Termination of Service for any reason other
than due to Disability, death, Retirement or termination for Cause, Stock Options shall be exercisable only as to those shares that were immediately exercisable by such Participant at the date of termination, and Stock Options may be exercised only
for a period of three (3) months following termination and any Restricted Stock Award and Restricted Stock Unit that has not vested as of the date of Termination of Service shall expire and be forfeited.
(b) In the event of a Termination of Service for Cause, all Stock Options granted to a Participant that have not been exercised and all
Restricted Stock Awards and Restricted Stock Units granted to a Participant that have not vested shall expire and be forfeited.
(c) Upon
Termination of Service for reason of Disability or death, all Stock Options shall be exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, and all Restricted Stock Awards and Restricted Stock Units shall vest
as to all shares subject to an outstanding Award, whether or not otherwise immediately vested, at the date of Termination of Service. Stock Options may be exercised for a period of one year following Termination of Service due to death or Disability
or the remaining unexpired term of the Stock Option, if less;
provided, however
, that no Stock Option shall be eligible for treatment as an ISO in the event such Stock Option is exercised more than one year following Termination of Service
due to Disability and
provided, further
, in order to obtain ISO treatment for Stock Options exercised by heirs or devisees of an optionee, the optionees death must have occurred while employed or within three months of Termination of
Service. In the event of Termination of Service due to Retirement, a Participants vested Stock Options shall be exercisable for one year following Termination of Service, provided that no Stock Option shall be eligible for treatment as an ISO
in the event such Stock Option is exercised more than three months following Termination of Service due to Retirement and any Stock Option, Restricted Stock Award or Restricted Stock Unit that has not vested as of the date of Termination of Service
shall expire and be forfeited.
(d) Notwithstanding anything herein to the contrary, no Stock Option shall be exercisable beyond the last
day of the original term of such Stock Option.
(e) Notwithstanding the provisions of this Section 2.9, the effect of a Change in
Control on the vesting/exercisability of Stock Options, Restricted Stock Awards and Restricted Stock Units is as set forth in Article 4.
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ARTICLE 3SHARES SUBJECT TO PLAN
Section
3.1
Available Shares
. The shares of Stock with respect to which Awards may be made under
the Plan shall be shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company, including shares purchased in the open market or in private transactions.
Section
3.2
Share Limitations
.
(a)
Share Reserve
. Subject to the following provisions of this Section 3.2, the maximum number of shares of Stock that may be
delivered to Participants and their beneficiaries under the Plan shall be equal to 305,497 shares of Stock. The maximum number of shares of Stock that may be delivered pursuant to the exercise of Stock Options (all of which may be granted as ISOs)
is 218,212 shares of Stock, which represents ten percent (10%) of the number of shares of common stock that were sold in connection with the conversion of Huntingdon Valley Bank from the mutual to stock form of organization on January 11, 2017
(the
Conversion
). The maximum number of shares of Stock that may be issued as Restricted Stock Awards and Restricted Stock Units is 87,285 shares of Stock, which represents four percent (4%) of the number of shares of common stock
that were sold in connection with the Conversion. The aggregate number of shares available for grant under this Plan and the number of shares of Stock subject to outstanding awards shall be subject to adjustment as provided in Section 3.4.
(b)
Computation of Shares Available.
For purposes of this Section 3.2, the number of shares of Stock available for the grant of
additional Stock Options, Restricted Stock Awards or Restricted Stock Units shall be reduced by the number of shares of Stock previously granted, subject to the following: to the extent any shares of Stock covered by an Award (including Restricted
Stock Awards and Restricted Stock Units) under the Plan are not delivered to a Participant or beneficiary for any reason, including because the Award is forfeited or canceled or because a Stock Option is not exercised, then such shares shall not be
deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. To the extent: (i) a Stock Option is exercised by using an actual or constructive exchange of shares of Stock
to pay the Exercise Price; or (ii) shares of Stock are withheld to satisfy withholding taxes upon exercise or vesting of an Award granted hereunder; or (iii) shares are withheld to satisfy the exercise price of Stock Options in a net
settlement of Stock Options, then the number of shares of Stock available shall be reduced by the gross number of Stock Options exercised rather than by the net number of shares of Stock issued.
Section
3.3
Limitations on Grants to Individuals; Initial Grants Employees and Directors
.
(a)
Stock OptionsEmployees.
The maximum number of shares of Stock, in the aggregate, that may be covered by a Stock
Option granted to any one Employee pursuant to Section 3.2 shall be 54,553 shares, all of which may be granted during any calendar year. Such maximum amount represents approximately twenty-five percent (25%) of the maximum number of shares of
Stock that may be delivered pursuant Stock Options under Section 3.2.
(b)
Restricted Stock Awards and Restricted Stock
UnitsEmployees
.
The maximum number of shares of Stock, in the aggregate, that may be subject to Restricted Stock Awards and Restricted Stock Units granted to any one Employee Participant under the Plan shall be 21,821 shares, all of
which may be granted during any calendar year. Such maximum amount represents approximately twenty-five percent (25%) of the maximum number of shares of Stock that may be issued as Restricted Stock Awards and Restricted Stock Units.
(c)
Stock OptionsDirectors.
The maximum number of shares of Stock, in the aggregate, that may be subject to Stock Options granted
to any one individual
non-employee
Director under the Plan shall be 10,910 shares, all of which may be granted during any calendar year and, in addition, all
non-employee
Directors, in the aggregate, may not receive more than 65,463 shares all of which may be granted during any calendar year. Such maximum amounts represent approximately five percent (5%) and thirty
percent (30%), respectively, of the maximum number of shares of Stock that may be delivered pursuant to Stock Options under Section 3.2.
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(d)
Restricted Stock Awards and Restricted Stock UnitsDirectors.
The maximum number
of shares of Stock, in the aggregate, that may be subject to Restricted Stock Awards or Restricted Stock Units granted to any one individual
non-employee
Director under the Plan shall be 4,364 shares, all of
which may be granted during any calendar year and, in addition, all
non-employee
Directors, in the aggregate, may not receive more than 26,185 shares, all of which may be granted during any calendar year. Such
maximum amounts represent approximately five percent (5%) and thirty percent (30%), respectively, of the maximum number of shares of Stock that may be issued as Restricted Stock Awards or Restricted Stock Units.
(e) The aggregate number of shares available for grant under this Plan and the number of shares subject to outstanding Awards, including the
limit on the number of Awards available for grant under this Plan described in this Section 3.3, shall be subject to adjustment as provided in Section 3.4.
(f) Subject to the foregoing limitations, each Director and Employee listed in Exhibit A who is in the Service of the Company and/or a
Subsidiary on the Effective Date shall receive an Award of Stock Options and/or Restricted Stock as set forth in Exhibit A upon receipt of stockholder approval of the Plan (the Initial Awards). The Initial Awards shall be self-executing
under the Plan and shall be granted as soon as practicable following receipt of stockholder approval of the Plan.
Section
3.4
Corporate Transactions
.
(a)
General.
In the event any recapitalization, forward or reverse stock split, reorganization, merger, consolidation,
spin-off,
combination, repurchase, or exchange of shares of Stock or other securities, stock dividend or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other
property), liquidation, dissolution, or other similar corporate transaction or event, affects the shares of Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan and/or
under any Award granted under the Plan, then the Committee shall, in an equitable manner, adjust any or all of: (i) the number and kind of securities deemed to be available thereafter for grants of Stock Options, Restricted Stock Awards and
Restricted Stock Units in the aggregate to all Participants and individually to any one Participant; (ii) the number and kind of securities that may be delivered or deliverable in respect of outstanding Stock Options, Restricted Stock Awards
and Restricted Stock Units; and (iii) the Exercise Price of Stock Options. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Stock Options, Restricted Stock Awards and
Restricted Stock Units (including, without limitation, cancellation of Stock Options, Restricted Stock Awards and Restricted Stock Units in exchange for the
in-the-money
value, if any, of the vested portion thereof, or substitution or exchange of Stock Options, Restricted Stock Awards and Restricted Stock Units using stock of a successor or other entity) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the Company or any parent or Subsidiary or the financial statements of the Company or any parent or Subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.
(b)
Merger in which Company is Not Surviving Entity.
In the event of any merger, consolidation, or other
business reorganization (including, but not limited to, a Change in Control) in which the Company is not the surviving entity, unless otherwise determined by the Committee at any time at or after grant and prior to the consummation of such merger,
consolidation or other business reorganization, any Stock Options granted under the Plan which remain outstanding shall be converted into Stock Options to purchase voting common equity securities of the business entity which survives such merger,
consolidation or other business reorganization having substantially the same terms and conditions as the outstanding Stock Options under this Plan and reflecting the same economic benefit (as measured by the difference between the aggregate Exercise
Price and the value exchanged for outstanding shares of Stock in such merger, consolidation or other business reorganization), all as determined by the Committee prior to the consummation of such merger; provided, however, that the Committee may, at
any time prior to the consummation of such merger, consolidation or other business reorganization, direct that all, but not less than all, outstanding Stock Options be canceled as of the effective date of such merger, consolidation or other business
reorganization in exchange for a cash payment per share of Stock equal to the excess (if any) of the value exchanged for an outstanding share of Stock in such merger, consolidation or other business reorganization over the Exercise Price of the
Stock Option being canceled; provided, further, that in the event the Exercise Price of outstanding Stock Options exceed the value to be exchanged for an outstanding share of Stock (an
Underwater Stock Option
) in such merger,
consolidation or other business reorganization, the Committee may, in its discretion, cancel and terminate such Underwater Stock Options without the consent of the holder of the Stock Option and without any payment to such holder.
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Section
3.5
Delivery of Shares
. Delivery of shares of
Stock or other amounts under the Plan shall be subject to the following:
(a)
Compliance with Applicable
Laws.
Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless such delivery or distribution complies
with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any Exchange or similar entity.
(b)
Certificates.
To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be
effected on a
non-certificated
basis, to the extent not prohibited by applicable law or the applicable rules of any Exchange.
ARTICLE 4CHANGE IN CONTROL
Section
4.1
Consequence of a Change in Control
. Subject to the provisions of Section 2.6
(relating to vesting and acceleration) and Section 3.4
(relating to the adjustment of shares), and except as otherwise provided in the Plan or as determined by the Committee and set forth in the terms of any Award Agreement or as set
forth in an employment, change in control, or severance agreement entered into by and between the Company and/or the Bank and an Employee:
(a) At the time of an Involuntary Termination at or following a Change in Control, all Stock Options then held by the Participant shall become
fully earned and exercisable (subject to the expiration provisions otherwise applicable to the Stock Option). All Stock Options may be exercised for a period of one year following the Participants Involuntary Termination, provided, however,
that no Stock Option shall be eligible for treatment as an ISO in the event such Stock Option is exercised more than three (3) months following such Involuntary Termination. To the extent not specified herein or in the Award Agreement, the
Committee shall have the discretion to determine the treatment of outstanding unvested Awards, provided, however, that any such Awards will be deemed earned and shall vest if not assumed by a successor entity.
(b) At the time of an Involuntary Termination at or following a Change in Control, all Awards of Restricted Stock described in
Section 2.1(b) and Restricted Stock Units described in Section 2.1(c) shall become fully earned and vested immediately. Notwithstanding the above, any Awards, the vesting of which are based on satisfaction of performance-based conditions
will be vested as specified in subsection (c) hereof.
(c) In the event of a Change in Control, any performance measure attached to a
Performance Award under the Plan shall be deemed satisfied at the target level as of the date of the Change in Control, unless the data supports and the Committee certifies, that the performance measures have been achieved at a higher
level than target as of the effective date of the Change in Control, in which case, the Performance Award will vest at such higher level.
Section
4.2
Definition of Change in Control
. For purposes of this Agreement, the term
Change
in Control
shall mean the consummation by the Company or the Bank, in a single transaction or series of related transactions, of any of the following:
(a)
Merger
: The Company or the Bank merges into or consolidates with another entity, or merges another bank or corporation into the
Company or the Bank, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before
the merger or consolidation;
(b)
Acquisition of Significant Share Ownership
: A person or persons acting in concert has or have
become the beneficial owner of 25% or more of a class of the Companys or the Banks Voting Securities; provided, however, this clause (b) shall not apply to beneficial ownership of the Companys or the Banks voting shares
held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding Voting Securities;
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(c)
Change in Board Composition
: During any period of two consecutive years, individuals
who constitute the Companys or the Banks Board of Directors at the beginning of the
two-year
period cease for any reason to constitute at least a majority of the Companys or the Banks
Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least
two-thirds
(2/3) of the directors who were directors at the beginning of the
two-year
period shall be deemed to have also been a director at the beginning of such period
or who is appointed as a director as a result of a directive, supervisory agreement or order issued by the primary federal regulator of the Company or the Bank or by the Federal Deposit Insurance Corporation shall be deemed to have also been a
director at the beginning of such period; or
(d)
Sale of Assets
: The Company or the Bank sells to a third party all or
substantially all of its assets.
Notwithstanding the foregoing, in the event that an Award constitutes Deferred Compensation, and the
settlement of, or distribution of benefits under, such Award is to be triggered solely by a Change in Control, then with respect to such Award, a Change in Control shall be defined as required under Code Section 409A, as in effect at the time
of such transaction.
ARTICLE 5COMMITTEE
Section
5.1
Administration
. The Plan shall be administered by the members of the Compensation
Committee of the Company who are Disinterested Board Members. If the Committee consists of fewer than three Disinterested Board Members, then the Board shall appoint to the Committee such additional Disinterested Board Members as shall be necessary
to provide for a Committee consisting of at least three Disinterested Board Members. Any members of the Committee who do not qualify as Disinterested Board Members shall abstain from participating in any discussion or decision to make or administer
Awards that are made to Participants who at the time of consideration for such Award are persons subject to the short-swing profit rules of Section 16 of the Exchange Act. The Board (or if necessary to maintain compliance with the applicable
listing standards, those members of the Board who are independent directors under the corporate governance statutes or rules of any national Exchange on which the Company lists, has listed or seeks to list its securities) may, in their
discretion, take any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.
Section
5.2
Powers of Committee
. The administration of the Plan by the Committee shall be subject
to the following:
(a) The Committee will have the authority and discretion to select from among the Companys and its
Subsidiaries Employees and Directors who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, features (including
automatic exercise in accordance with Section 7.18 hereof), performance criteria, restrictions (including without limitation, provisions relating to
non-competition,
non-solicitation
and confidentiality), and other provisions of such Awards (subject to the restrictions imposed by Article 6), to cancel or suspend Awards and to reduce, eliminate or accelerate any
restrictions or vesting requirements applicable to an Award at any time after the grant of the Award or to extend the time period to exercise a Stock Option, provided that such extension is consistent with Code Section 409A. Notwithstanding the
foregoing, the Committee will not have the authority or discretion to accelerate the vesting requirements applicable to an Award to avoid the minimum vesting requirements pursuant to Section 2.6 (except to the extent permitted pursuant to
Section 2.6 hereof), or accelerate the vesting requirements applicable to an Award as a result of or in connection with a Change in Control (except to the extent permitted pursuant to Section 4.1 hereof).
(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
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(c) The Committee will have the authority to define terms not otherwise defined herein.
(d) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the
charter and bylaws of the Company and applicable corporate law.
(f) The Committee will have the authority to: (i) suspend a
Participants right to exercise a Stock Option during a blackout period (or similar restricted period) or to exercise in a particular manner (i.e., such as a cashless exercise or broker-assisted exercise) to the extent
that the Committee deems it necessary or in the best interests of the Company in order to comply with the securities laws and regulations issued by the SEC (the
Blackout Period
); and (ii) to extend the period to exercise a
Stock Option by a period of time equal to the Blackout Period, provided that such extension does not violate Section 409A of the Code, the Incentive Stock Option requirements or applicable laws and regulations.
Section
5.3
Delegation by Committee
. Except to the extent prohibited by applicable law, the
applicable rules of an Exchange upon which the Company lists its shares or the Plan, or as necessary to comply with the exemptive provisions of Rule
16b-3
promulgated under the Exchange Act, the Committee may
allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including: (a) delegating to a
committee of one or more members of the Board who are not
non-employee
directors, within the meaning of Rule
16b-3,
the authority to grant Awards under the
Plan to eligible persons who are not then subject to Section 16 of the Exchange Act; or (b) delegating to a committee of one or more members of the Board who would be eligible to serve on the Compensation Committee of the Company pursuant
to the listing requirements imposed by any national securities exchange on which the Company lists, has listed or seeks to list its securities, the authority to grant awards under the Plan. The acts of such delegates shall be treated hereunder
as acts of the Committee and such delegates shall report regularly to the Committee regarding the delegated duties and responsibilities and any Awards so granted. Any such allocation or delegation may be revoked by the Committee at any time.
Section
5.4
Information to be Furnished to Committee
. As may be permitted by applicable law, the
Company and its Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries as to a Participants employment,
termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be manifestly incorrect. Subject to applicable law, Participants and other persons entitled to
benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
Section
5.5
Committee Action
. The Committee shall hold such meetings, and may make such administrative
rules and regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions
taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. Subject to Section 5.1, all actions of the Committee shall be final and conclusive
and shall be binding upon the Company, Participants and all other interested parties. Any person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by a member
of the Committee or by a representative of the Committee authorized to sign the same in its behalf.
ARTICLE 6AMENDMENT AND
TERMINATION
Section
6.1
General
. The Board may, as permitted by law, at any time,
amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination (except as provided in Section 2.7, Section 3.4 and Section 6.2) may cause the Award to violate Code Section 409A, may
cause the repricing of a Stock Option, or, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely impair the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board;
provided,
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however
, that, no amendment may (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the aggregate number of securities which may
be issued under the Plan, other than pursuant to Section 3.4, or (c) materially modify the requirements for participation in the Plan, unless the amendment under (a), (b) or (c) above is approved by the Companys stockholders.
Section
6.2
Amendment to Conform to Law and Accounting Changes
. Notwithstanding any
provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of: (i) conforming the Plan or
the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A); or (ii) avoiding an accounting treatment resulting from an accounting pronouncement or
interpretation thereof issued by the SEC or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which, in the sole discretion of the Committee, may materially and adversely affect
the financial condition or results of operations of the Company. By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 6.2 or Section 2.7 to any Award granted under the
Plan without further consideration or action.
ARTICLE 7GENERAL TERMS
Section
7.1
No Implied Rights
.
(a)
No Rights to Specific Assets.
Neither a Participant nor any other person shall by reason of participation in the
Plan acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only a contractual right to the shares of Stock or amounts, if any, payable or distributable under the Plan, unsecured by any assets of the Company or any Subsidiary, and
nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b)
No Contractual Right to Employment or Future Awards.
The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating Employee the right to be retained in the employ of the Company or any Subsidiary or any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to receive a future Award under the Plan.
(c)
No Rights as a Stockholder
. Except as otherwise provided in the Plan or in the Award Agreement, no Award under the Plan shall
confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
Section
7.2
Transferability
. ISOs under the Plan are not transferable except: (i) as designated
by the Participant by will or by the laws of descent and distribution; (ii) to a trust established by the Participant, if under Code Section 671 and applicable state law, the Participant is considered the sole beneficial owner of the Stock
Option while held in trust; or (iii) between spouses incident to a divorce or pursuant to a domestic relations order, provided, however, in the case of a transfer within the meaning of this paragraph (iii), the Stock Option shall not qualify as
an ISO as of the day of such transfer. The Committee shall have the discretion to permit the transfer of vested Stock Options (other than ISOs) under the Plan;
provided, however,
that such transfers shall be in the same manner as set forth
above for ISOs.
Awards of Restricted Stock shall not be transferable prior to the time that such Awards vest in the Participant. A
Restricted Stock Unit Award is not transferable, except in the event of death, prior to the time that the Restricted Stock Unit Award vests and is earned and the property in which the Restricted Stock Unit is denominated is distributed to the
Participant or the Participants Beneficiary.
Section
7.3
Designation of
Beneficiaries
. A Participant hereunder may file with the Company a written designation of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend any such designation (
Beneficiary
Designation
). Any designation of beneficiary under this Plan shall be controlling
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over any other disposition, testamentary or otherwise (unless such disposition is pursuant to a domestic relations order);
provided, however,
that if the Committee is in doubt as to the
entitlement of any such beneficiary to any Award, the Committee may determine to recognize only the legal representative of the Participant, in which case the Company, the Committee and the members thereof shall not be under any further liability to
anyone.
Section
7.4
Non-Exclusivity
. Neither the
adoption of this Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Committee to adopt such other incentive arrangements as
either may deem desirable, including, without limitation, the granting of Restricted Stock Awards, Restricted Stock Units or Stock Options and such arrangements may be either generally applicable or applicable only in specific cases.
Section
7.5
Award Agreement
. Each Award granted under the Plan shall be evidenced by an Award
Agreement signed by the Participant. A copy of the Award Agreement, in any medium chosen by the Committee, shall be provided (or made available electronically) to the Participant.
Section
7.6
Form and Time of Elections/Notification Under Code
Section
83(b)
. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. Notwithstanding anything herein to the
contrary, the Committee may, on the date of grant or at a later date, as applicable, prohibit an individual from making an election under Code Section 83(b). If the Committee has not prohibited an individual from making this election, an
individual who makes this election shall notify the Committee of the election within ten (10) days of filing notice of the election with the Internal Revenue Service. This requirement is in addition to any filing and notification required under
the regulations issued under the authority of Code Section 83(b).
Section
7.7
Evidence
. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information upon which the person is acting considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
Section
7.8
Tax Withholding
. Where a Participant is entitled to receive
shares of Stock upon the vesting or exercise of an Award, the Company shall have the right to require such Participant to pay to the Company the amount of any tax that the Company is required to withhold with respect to such vesting or exercise, or,
in lieu thereof, to retain, or to sell without notice, a sufficient number of shares of Stock to cover the minimum amount required to be withheld. To the extent determined by the Committee and specified in an Award Agreement, a Participant shall
have the right to direct the Company to satisfy the minimum amount (or an amount up to a Participants highest marginal tax rate provided such withholding does not trigger liability accounting under FASB ASC Topic 718 or its successor) required
for federal, state and local tax withholding by: (i) with respect to a Stock Option, reducing the number of shares of Stock subject to the Stock Option (without issuance of such shares of Stock to the Stock Option holder) by a number equal to
the quotient of (a) the total minimum amount of required tax withholding divided by (b) the excess of the Fair Market Value of a share of Stock on the exercise date over the Exercise Price per share of Stock; and (ii) with respect to
Restricted Stock Awards and Restricted Stock Units, withholding a number of shares (based on the Fair Market Value on the vesting date) otherwise vesting that would satisfy the minimum amount of required tax withholding (or an amount up to a
Participants highest marginal rate provided such withholding does not trigger liability accounting under FASB ASC Topic 718 or its successor). Provided there are no adverse accounting consequences to the Company (a requirement to have
liability classification of an award under FASB ASC Topic 718 is an adverse consequence), a Participant who is not required to have taxes withheld may require the Company to withhold in accordance with the preceding sentence as if the Award were
subject to minimum tax withholding requirements or up to such Participants highest marginal tax rate.
Section
7.9
Action by Company or Subsidiary
. Any action required or permitted to be taken by the
Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more members of the Board (including a committee of the Board) who are duly authorized to act for the Board, or (except to the extent prohibited by
applicable law or applicable rules of the Exchange on which the Company lists its securities) by a duly authorized officer of the Company or such Subsidiary.
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Section
7.10
Successors
. All obligations of the
Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business, stock, and/or assets of the Company.
Section
7.11
Indemnification
. To the fullest extent permitted by law and the Companys governing documents, each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority
was delegated in accordance with Section 5.3, or an Employee of the Company, shall be indemnified and held harmless by the Company against and from any loss (including amounts paid in settlement), cost, liability or expense (including
reasonable attorneys fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Companys approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such
loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute or regulation. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Companys charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. The foregoing right to indemnification shall include the
right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that, if required by applicable law, an advancement of expenses shall be made only upon delivery to the
Company of an undertaking, by or on behalf of such persons to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be
indemnified for such expenses.
Section
7.12
No Fractional Shares
. Unless otherwise permitted
by the Committee, no fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash or other property shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise eliminated by rounding down.
Section
7.13
Governing Law
. The Plan, all Awards granted hereunder, and all actions taken in
connection herewith shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without reference to principles of conflict of laws, except as superseded by applicable federal law. The federal and state courts
located in the Commonwealth of Pennsylvania, shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any award under this Plan, each Participant and any other person claiming
any rights under the Plan agrees to submit himself or herself and any legal action that the Participant brings under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.
Section
7.14
Benefits Under Other Plans
. Except as otherwise provided by the Committee or as set
forth in a Qualified Retirement Plan, Awards to a Participant (including the grant and the receipt of benefits) under the Plan shall be disregarded for purposes of determining the Participants benefits under, or contributions to, any Qualified
Retirement Plan,
non-qualified
plan and any other benefit plans maintained by the Participants employer. The term
Qualified Retirement Plan
means any plan of the Company or a
Subsidiary that is intended to be qualified under Code Section 401(a).
Section
7.15
Validity
. If any provision of this Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal or invalid provision has never been included herein.
Section
7.16
Notice
. Unless
otherwise provided in an Award Agreement, all written notices and all other written communications to the Company provided for in the Plan or in any Award Agreement, shall be delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or
two-day
delivery), or sent by facsimile, email or prepaid overnight courier to the Company at its
principal executive office. Such notices, demands, claims and other communications shall be deemed given:
(a) in the case of delivery by
overnight service with guaranteed next day delivery, the next day or the day designated for delivery;
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(b) in the case of certified or registered U.S. mail, five (5) days after deposit in the
U.S. mail; or
(c) in the case of facsimile or email, the date upon which the transmitting party received confirmation of receipt;
provided, however,
that in no event shall any such communications be deemed to be given later than the date they are actually received, provided they are actually received.
In the event a communication is not received, it shall only be deemed received upon the showing of an original of the applicable receipt, registration or
confirmation from the applicable delivery service. Communications that are to be delivered by U.S. mail or by overnight service to the Company shall be directed to the attention of the Companys Corporate Secretary, unless otherwise provided in
the Participants Award Agreement.
Section
7.17
Forfeiture Events
.
(a) The Committee may specify in an Award Agreement that the Participants rights, payments, and benefits with respect to an Award shall
be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events include, but are not limited to,
termination of employment for cause, termination of the Participants provision of Services to the Company or any Subsidiary, violation of material Company or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive
covenants that may apply to the Participant, or other conduct of the Participant that is detrimental to the business or reputation of the Company or any Subsidiary.
(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the federal securities laws, any Participant who is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or who is subject to clawback under
Section 954 of the Dodd-Frank Act shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve month period following the first public issuance or filing with the SEC (whichever first
occurred) of the financial document embodying such financial reporting requirement.
In addition, Awards granted hereunder are subject to
any clawback policy adopted by the Board from time to time.
Section
7.18
Automatic Exercise
. In
the sole discretion of the Committee exercised in accordance with Section 5.2(a) above, any Stock Options that are exercisable but unexercised as of the day immediately before the tenth anniversary of the date of grant may be automatically
exercised, in accordance with procedures established for this purpose by the Committee, but only if the exercise price is less than the Fair Market Value of a share of Stock on such date and the automatic exercise will result in the issuance of at
least one (1) whole share of Stock to the Participant after payment of the exercise price and any applicable minimum tax withholding requirements. Payment of the exercise price and any applicable tax withholding requirements shall be made by a
net settlement of the Stock Option whereby the number of shares of Stock to be issued upon exercise are reduced by a number of shares having a Fair Market Value on the date of exercise equal to the exercise price and any applicable minimum tax
withholding.
Section
7.19
Regulatory Requirements
.
(a) The grant and settlement of Awards under this Plan shall be conditioned upon and subject to compliance with Section 18(k) of the
Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder.
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(b) The Board of Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation, as applicable, shall have the authority to direct the Company to require Participants to exercise or forfeit their Stock Options.
ARTICLE 8DEFINED TERMS; CONSTRUCTION
Section
8.1
In addition to the other definitions contained herein, unless otherwise specifically provided in an
Award Agreement, the following definitions shall apply:
(a) 10% Stockholder means an individual who, at the time of grant,
owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
(b) Award
means any Stock Option, Restricted Stock, Restricted Stock Unit, Performance Award or any or all of them, or any other right or interest relating to stock or cash, granted to a Participant under the Plan.
(c) Award Agreement means the document (in whatever medium prescribed by the Committee) which evidences the terms and conditions
of an Award under the Plan. Such document is referred to as an agreement, regardless of whether a Participants signature is required.
(d) Board means the Board of Directors of the Company.
(e) If the Participant is subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that
provides a definition of termination for Cause, then, for purposes of this Plan, the term Cause shall have meaning set forth in such agreement. In the absence of such a definition, Cause means termination because
of a Participants personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material breach of the Banks Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers
of public companies that in the reasonable opinion of the Chief Executive Officer of the Bank or the Board will likely cause substantial financial harm or substantial injury to the reputation of the Bank, willfully engaging in actions that in the
reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Bank, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than
routine traffic violations or similar offenses) or final
cease-and-desist
order, or material breach of any provision of the contract.
(f) Change in Control has the meaning ascribed to it in Section 4.2.
(g) Code means the Internal Revenue Code of 1986, as amended, and any rules, regulations and guidance promulgated thereunder, as
modified from time to time.
(h) Code Section 409A means the provisions of Section 409A of the Code and any rules,
regulations and guidance promulgated thereunder, as modified from time to time.
(i) Committee means the Committee acting
under Article 5.
(j) Director means a member of the Board of Directors of the Company or a Subsidiary. A Director
Emeritus shall mean a former member of the Board of Directors of the Company or a Subsidiary but who continues to be associated with the Company or a Subsidiary as an adviser.
(k) If the Participant is subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that
provides a definition of Disability or Disabled, then, for purposes of this Plan, the terms Disability or Disabled shall have meaning set forth in such agreement. In the absence of such a definition,
Disability shall be defined in accordance with the Banks long-term disability plan. To the extent that an Award hereunder is subject to Code Section 409A, Disability or Disabled shall mean that a
Participant: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve months; or (ii) is, by reason of any medically determinable physical or mental
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impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not
less than three months under an accident and health plan covering Employees. Except to the extent prohibited under Code Section 409A, if applicable, the Committee shall have discretion to determine if a termination due to Disability has
occurred.
(l) Disinterested Board Member means a member of the Board who: (i) is not a current Employee of the Company
or a Subsidiary; (ii) is not a former employee of the Company or a Subsidiary who receives compensation for prior Services (other than benefits under a
tax-qualified
retirement plan) during the taxable
year; (iii) has not been an officer of the Company or a Subsidiary; (iv) does not receive compensation from the Company or a Subsidiary, either directly or indirectly, for services as a consultant or in any capacity other than as a
Director except in an amount for which disclosure would not be required pursuant to Item 404 of SEC Regulation
S-K
in accordance with the proxy solicitation rules of the SEC, as amended or any successor
provision thereto; and (v) does not possess an interest in any other transaction, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(a) of SEC Regulation
S-K
under the proxy solicitation rules of the SEC, as amended or any successor provision thereto. The term Disinterested Board Member shall be interpreted in such manner as shall be necessary to conform to the
requirements of Code Section 162(m), Rule
16b-3
promulgated under the Exchange Act and the corporate governance standards imposed on compensation committees under the listing requirements imposed by any
Exchange on which the Company lists or seeks to list its securities.
(m) Dividend Equivalent Rights means the right,
associated with a Restricted Stock Unit, to receive a payment, in cash or stock, as applicable, equal to the amount of dividends paid on a share of the Companys Stock, as specified in the Award Agreement.
(n) Employee means any person employed by the Company or any Subsidiary. Directors who are also employed by the Company or a
Subsidiary shall be considered Employees under the Plan.
(o) Exchange means any national securities exchange on which the
Stock may from time to time be listed or traded.
(p) Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time.
(q) Exercise Price means the price established with respect to a Stock Option pursuant to Section 2.2.
(r) Fair Market Value on any date, means: (i) if the Stock is listed on an Exchange, the closing sales price on such
Exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported; or (ii) if the Stock is not listed on a securities exchange,
Fair Market Value shall mean a price determined by the Committee in good faith on the basis of objective criteria consistent with the requirements of Code Section 422 and applicable provisions of Section 409A.
(s) A termination of employment by an Employee Participant shall be deemed a termination of employment for Good Reason
as a
result of the Participants resignation from the employ of the Company or any Subsidiary upon the occurrence of any of the following events:
(i) a material diminution in Participants base compensation;
(ii) a material diminution in Participants authority, duties or responsibilities;
(iii) a change in the geographic location at which Participant must perform his duties that is more than thirty-five
(35) miles from the location of Participants principal workplace on the date of this Agreement; or
(iv) in the
event a Participant is a party to an employment, change in control, severance or similar agreement that provides a definition for Good Reason or a substantially similar term, then the occurrence of any event set forth in such definition.
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(t) Immediate Family Member means with respect to any Participant: (i) any of
the Participants children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses, former spouses, siblings, nieces, nephews,
mothers-in-law,
fathers-in-law,
sons-in-law,
daughters-in-law,
brothers-in-law
or
sisters-in-law,
including relationships created by adoption; (ii) any natural person sharing the Participants household (other than as a tenant or employee, directly or indirectly, of the
Participant); (iii) a trust in which any combination of the Participant and persons described in section (i) and (ii) above own more than fifty percent (50%) of the beneficial interests; (iv) a foundation in which any combination of the
Participant and persons described in sections (i) and (ii) above control management of the assets; or (v) any other corporation, partnership, limited liability company or other entity in which any combination of the Participant and persons
described in sections (i) and (ii) above control more than fifty percent (50%) of the voting interests.
(u) Involuntary
Termination means the Termination of Service of a Participant by the Company or Subsidiary (other than termination for Cause) or termination of employment by an Employee Participant for Good Reason.
(v) ISO has the meaning ascribed to it in Section 2.1(a).
(w)
Non-Qualified
Option means the right to purchase shares of Stock that is either:
(i) granted to a Participant who is not an Employee; or (ii) granted to an Employee and either is not designated by the Committee to be an ISO or does not satisfy the requirements of Section 422 of the Code.
(x) Participant means any individual who has received, and currently holds, an outstanding Award under the Plan.
(y) Performance Award has the meaning ascribed to it in Sections 2.1(d) and 2.5.
(z) Restricted Stock or Restricted Stock Award has the meaning ascribed to it in Sections 2.1(b) and 2.3.
(aa) Restricted Stock Unit has the meaning ascribed to it in Sections 2.1(c) and 2.4.
(bb) Restriction Period has the meaning set forth in Section 2.4(b)(iii).
(cc) Retirement means, unless otherwise specified in an Award Agreement, retirement from employment or service on or after the
attainment of age 65. An Employee who is also a Director shall not be deemed to have terminated due to Retirement for purposes of vesting of Awards and exercise of Stock Options until both Service as an Employee and Service as a Director has ceased.
A
non-employee
Director will be deemed to have terminated due to Retirement under the provisions of this Plan only if the
non-employee
Director has terminated Service on
the Board(s) of Directors and any Subsidiary or affiliate in accordance with applicable Company policy, following the provision of written notice to such Board(s) of Directors of the
non-employee
Directors intention to retire. A
non-employee
Director who continues in Service as a Director Emeritus or advisory director shall be deemed to be in Service of the Employer for purposes of vesting of
Awards and exercise of Stock Options.
(dd) SEC means the United States Securities and Exchange Commission.
(ee) Securities Act means the Securities Act of 1933, as amended from time to time.
(ff) Service means service as an Employee or
non-employee
Director of the Company or a
Subsidiary, as the case may be, and shall include service as a Director Emeritus or advisory director. Service shall not be deemed interrupted in the case of sick leave, military leave or any other absence approved by the Company or a Subsidiary, in
the case of transferees between payroll locations or between the Company, a Subsidiary or a successor.
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(gg) Stock means the common stock of the Company, $0.01 par value per share.
(hh) Stock Option has the meaning ascribed to it in Section 2.1(a) and 2.2.
(ii) Subsidiary means any corporation, affiliate, bank or other entity which would be a subsidiary corporation with respect to the
Company as defined in Code Section 424(f) and, other than with respect to an ISO, shall also mean any partnership or joint venture in which the Company and/or other Subsidiary owns more than 50% of the capital or profits interests.
(jj) Termination of Service means the first day occurring on or after a grant date on which the Participant ceases to be an
Employee or Director (including a Director Emeritus or advisory director) of the Company or any Subsidiary, regardless of the reason for such cessation, subject to the following:
(i) The Participants cessation as an Employee shall not be deemed to occur by reason of the transfer of the Participant
between the Company and a Subsidiary or between two Subsidiaries.
(ii) The Participants cessation as an Employee
shall not be deemed to occur by reason of the Participants being on a bona fide leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise receiving the Participants Services, provided such leave of
absence does not exceed six months, or if longer, so long as the Employee retains a right to reemployment with the Company or Subsidiary under an applicable statute or by contract. For these purposes, a leave of absence constitutes a bona fide leave
of absence only if there is a reasonable expectation that the Employee will return to perform Services for the Company or Subsidiary. If the period of leave exceeds six months and the Employee does not retain a right to reemployment under an
applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six month period. For purposes of this
sub-section,
to the extent applicable,
an Employees leave of absence shall be interpreted by the Committee in a manner consistent with Treasury Regulation
Section 1.409A-1(h)(1).
(iii) If, as a result of a sale or other transaction, the Subsidiary for whom Participant is employed (or to whom the
Participant is providing Services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an Employee of the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the
Participants Termination of Service caused by the Participant being discharged by the entity for whom the Participant is employed or to whom the Participant is providing Services.
(iv) Except to the extent Section 409A of the Code may be applicable to an Award, and subject to the foregoing paragraphs
of this
sub-section,
the Committee shall have discretion to determine if a Termination of Service has occurred and the date on which it occurred.
In the event that any Award under the Plan constitutes
Deferred Compensation (as defined in Section 2.7 hereof), the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of Separation from Service as defined under Code
Section 409A and under Treasury Regulation
Section 1.409A-1(h)(ii).
For purposes of this Plan, a
Separation from Service
shall have occurred if the Bank and Participant reasonably
anticipate that no further Services will be performed by the Participant after the date of the Termination of Service (whether as an employee or as an independent contractor) or the level of further Services performed will be less than 50% of the
average level of bona fide Services in the 36 months immediately preceding the Termination of Service. If a Participant is a Specified Employee, as defined in Code Section 409A and any payment to be made hereunder shall be
determined to be subject to Code Section 409A, then if required by Code Section 409A, such payment or a portion of such payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month
following Participants Separation from Service.
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(v) With respect to a Participant who is a Director, cessation as a Director will
not be deemed to have occurred if the Participant continues as a Director Emeritus or advisory director. With respect to a Participant who is both an Employee and a Director, termination of employment as an Employee shall not constitute a
Termination of Service for purposes of the Plan so long as the Participant continues to provide Service as a Director, Director Emeritus or advisory director.
(kk) Voting Securities means any securities which ordinarily possess the power to vote in the election of directors without the
happening of any
pre-condition
or contingency.
Section
8.2
In this
Plan, unless otherwise stated or the context otherwise requires, the following uses apply:
(a) actions permitted under this Plan may be
taken at any time and from time to time in the actors
reasonable discretion;
(b) references to a statute shall refer to the
statute and any successor statute, and to all regulations promulgated under or implementing the statute or its successor, as in effect at the relevant time;
(c) in computing periods from a specified date to a later specified date, the words from and commencing on (and the
like) mean from and including, and the words to, until and ending on (and the like) mean to, but excluding;
(d) references to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that
succeeds to the functions of the agency, authority or instrumentality;
(e) indications of time of day mean Eastern Time;
(f) including means including, but not limited to;
(g) all references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Plan unless otherwise specified;
(h) all words used in this Plan will be construed to be of such gender or number as the circumstances and context require;
(i) the captions and headings of articles, sections, schedules and exhibits appearing in or attached to this Plan have been inserted solely
for convenience of reference and shall not be considered a part of this Plan nor shall any of them affect the meaning or interpretation of this Plan or any of its provisions;
(j) any reference to a document or set of documents in this Plan, and the rights and obligations of the parties under any such documents,
shall mean such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and
(k) all accounting terms not specifically defined herein shall be construed in accordance with GAAP.
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sPEcIAL MEETIng OF HV BAncORP, Inc. Special Meeting of HV Bancorp, Inc. Date: June 13, 2018 to be held on
Wednesday, June 13, 2018 Place: Time: Huntingdon 3:00 p.m. (Local Valley Time) Bank, 1388 West Street Road, for Holders as of May 2, 2018 Warminster, Pennsylvania, 18974 This proxy is being solicited on behalf of the Board of Directors
Please make your marks like this: Use dark black pencil or pen only VOTE BY: InTERnET TELEPHOnE The Board of Directors Recommends a Vote FOR proposal 1. Call provided. Go To
866-859-2443
For Against Abstain www.proxypush.com/HVBc 1: A Board of Directors proposal to approve and Cast your vote online.
OR Use any touch-tone telephone. implement the HV Bancorp, Inc. 2018 Equity View Meeting Documents. Have your Proxy Card ready. Incentive Plan. Follow the
simple recorded instructions. envelope MAIL the OR Mark, sign and date your Proxy Card. in Detach your Proxy Card. Return your Proxy Card in the postage-paid portion envelope
provided. The undersigned hereby appoints the official proxy committee, consisting of all members of the Board of Directors, this with full powers of substitution, to act as attorneys and proxies for the undersigned to vote
all shares of common stock just of HV Bancorp, Inc. (the Company) which the undersigned is entitled to vote at the Special Meeting of Stockholders (Special Meeting) to be held at Huntingdon Valley Bank, 1388 West Street Road,
Warminster, Pennsylvania, 18974 on June 13, 2018, at 3:00 p.m., local time. The official proxy committee is authorized to cast all votes to which the return undersigned is entitled as follows: and THIS PROXY WILL BE VOTED
AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED perforation AT THE SPECIAL MEETING. All votes must be received by 11:59 P.M., Eastern Time, June 12, 2018.
the at carefully PROXY TABULATOR FOR HV BAncORP, Inc. P.O. BOX 8016 separate cARY, nc 27512-9903 To attend the meeting and vote your shares in person, please mark this box. Please Authorized
SignaturesThis section must be completed for your Instructions to be executed. EVENT # Please Sign Here Please Date Above CLIENT # Please Sign Here Please Date Above Please sign exactly as your
name(s) appears on this card. If held in joint tenancy, all persons OFFICE # should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer
signing the proxy.
Proxy HV Bancorp, Inc. special Meeting of stockholders June 13, 2018, 3:00 p.m. (Eastern
Time) This Proxy is solicited on Behalf of the Board of Directors The undersigned hereby appoints the official proxy committee, consisting of all members of the Board of Directors, with full powers of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of common stock of HV Bancorp, Inc. (the Company) which the undersigned is entitled to vote at the Special Meeting of Stockholders (Special Meeting) to be held at
Huntingdon Valley Bank, 1388 West Street Road, Warminster, Pennsylvania, 18974 on June 13, 2018, at 3:00 p.m., local time. The official proxy committee is authorized to cast all votes to which the undersigned is entitled as follows: The purpose
of the Special Meeting is to take action on the following: 1. A Board of Directors proposal to approve and implement the HV Bancorp, Inc. 2018 Equity Incentive Plan. The Board of Directors of the Company recommends a vote FOR the
proposal. Should the undersigned be present and elect to vote at the Special Meeting or at any adjournment thereof and after notification to the Secretary of the Company at the Special Meeting of the stockholders decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated and of no further force and effect. This proxy may also be revoked by sending written notice to the Secretary of the Company at the address set forth on the Notice of
Special Meeting of Stockholders, or by the filing of a later proxy prior to a vote being taken on a particular proposal at the Special Meeting. The undersigned acknowledges receipt from the Company prior to the execution of this proxy of notice of
the Special Meeting and a proxy statement dated May 9, 2018. This proxy, when properly executed, will be voted in the manner directed herein. If no direction is made, this proxy will be voted FOR the proposal. In their discretion,
the named Proxies are authorized to vote upon such other matters that may properly come before the special Meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (sEE REVERsE
sIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors recommendation. The named Proxies cannot vote your shares unless you sign and return this card. Please separate carefully at the perforation and
return just this portion in the envelope provided.
SPEcIAL MEETIng OF HV BAncORP, Inc. Special Meeting of HV Bancorp, Inc. Date: June 13, 2018 to be held on
Wednesday, June 13, 2018 Place: Time: Huntingdon 3:00 p.m. (Local Valley Time) Bank, 1388 West Street Road, for Holders as of May 2, 2018 Warminster, Pennsylvania, 18974 This voting instruction form is being solicited on behalf of the
Board of Directors Please make your marks like this: Use dark black pencil or pen only VOTE BY: InTERnET TELEPHOnE The Board of Directors Recommends a Vote FOR proposal 1. Call provided. Go To
866-859-2443
For Against Abstain www.proxypush.com/HVBc 1: A Board of Directors proposal to approve and Cast your vote online. OR Use any touch-tone
telephone. implement the HV Bancorp, Inc. 2018 Equity View Meeting Documents. Have your Voting Instruction Form ready. Incentive Plan. Follow the simple recorded instructions.
envelope MAIL the OR Mark, sign and date your Voting Instruction Form. in Detach your Voting Instruction Form. Return your Voting Instruction Form in the postage-paid portion
envelope provided. this just return and perforation the All votes for ESOP participants must be received by
11:59 P.M., Eastern Time, at June 10, 2018. carefully PROXY TABULATOR FOR HV BAncORP, Inc. P.O. BOX 8016 separate cARY, nc 27512-9903 Please Authorized SignatureThis section must be completed for your Instructions to be executed. EVENT
# Please Sign Here Please Date Above CLIENT # OFFICE #
HV BAncORP, Inc. cOnFIDEnTIAL ESOP VOTIng InSTRUcTIOnS HUnTIngDOn VALLEY BAnK EMPLOYEE STOcK OWnERSHIP PLAn FOR
THE SPEcIAL MEETIng OF STOcKHOLDERS TO BE HELD On JUnE 13, 2018 Dear ESOP Participant: On behalf of the Board of Directors of HV Bancorp, Inc. (the Company), you are receiving the attached Vote Authorization Form to convey to
Community Bank of Pleasant Hill, DBA First Trust of MidAmerica (the ESOP Trustee) your voting instructions on the proposal to be presented at the Companys Special Meeting of Stockholders to be held at Huntingdon Valley Bank at 1388
West Street Road, Warminster, PA 18974 on Wednesday, June 13, 2018 at 3:00 p.m., Eastern Time (ET). The Huntingdon Valley Bank Employee Stock Ownership Plan (the ESOP) allows participants to direct the ESOP Trustee how
to vote the common stock of the Company that has been allocated to the participants ESOP accounts as of May 2, 2018, the record date for stockholders entitled to vote at the Special Meeting. Mediant is the agent that will receive the ESOP
Vote Authorization Forms and tabulate the results. In order to direct the voting of the shares allocated to your account, you must either complete, sign and date the ESOP Authorization Form and return it in the accompanying postage-paid envelope to
Mediant or you may provide your voting instructions via the Internet or by telephone, as described on the enclosed ESOP Vote Authorization Form. In any event, your voting instructions must be received no later than 11:59 p.m., ET, on June 10,
2018. The ESOP Trustee will vote the shares of Company common stock allocated to participants accounts in accordance with the timely received and completed voting instructions, so long as such vote is in accordance with the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). YOUR VOTIng InSTRUcTIOnS MUST BE REcEIVED BY MEDIAnT nO LATER THAn 11:59 P.M, EASTERn TIME, JUnE 10, 2018. YOUR InDIVIDUAL VOTE WILL nOT BE REVEALED TO THE
cOMPAnY. Your confidential vote and the votes of other participants will be tallied by Mediant and the results provided to the ESOP Trustee who will: 1. Vote the shares for which voting instructions are timely received in
accordance with such instructions; and 2. Vote the remaining unallocated shares or allocated shares for which no timely instructions have been received in the same proportion as shares for which participants have issued voting
instructions, subject to its fiduciary duties under ERISA. If you do not direct the ESOP Trustee how to vote the shares of Company common stock allocated to your account, the ESOP Trustee will vote your shares in a manner calculated to most
accurately reflect the instructions it receives from other participants, subject to its fiduciary duties.
SPEcIAL MEETIng OF HV BAncORP, Inc. Special Meeting of HV Bancorp, Inc. Date: June 13, 2018 to be held on
Wednesday, June 13, 2018 Place: Time: Huntingdon 3:00 p.m. (Local Valley Time) Bank, 1388 West Street Road, for Holders as of May 2, 2018 Warminster, Pennsylvania, 18974 This voting instruction form is being solicited on behalf of the
Board of Directors Please make your marks like this: Use dark black pencil or pen only VOTE BY: InTERnET TELEPHOnE The Board of Directors Recommends a Vote FOR proposal 1. Call provided. Go To
866-859-2443
For Against Abstain www.proxypush.com/HVBc 1: A Board of Directors proposal to approve and Cast your vote online. OR Use any touch-tone
telephone. implement the HV Bancorp, Inc. 2018 Equity View Meeting Documents. Have your Voting Instruction Form ready. Incentive plan. Follow the simple recorded instructions.
envelope MAIL the OR Mark, sign and date your Voting Instruction Form. in Detach your Voting Instruction Form. Return your Voting Instruction Form in the portion postage-paid
envelope provided. this just return and perforation All votes for 401(k) Plan participants must be received by 11:59 P.M., Eastern Time, the June 10,
2018. at carefully PROXY TABULATOR FOR HV BAncORP, Inc. P.O. BOX 8016 separate cARY, nc 27512-9903 Please Authorized SignatureThis section must be completed for your Instructions to be executed. EVENT
# Please Sign Here Please Date Above CLIENT # OFFICE #
HV BAncORP, Inc. cOnFIDEnTIAL 401(k) PLAn VOTIng InSTRUcTIOnS HUnTIngDOn VALLEY BAnK 401(k) PROFIT SHARIng PLAn
AnD TRUST THE SPEcIAL MEETIng OF THE STOcKHOLDERS TO BE HELD On JUnE 13, 2018 Dear 401(k) Plan Participant: On behalf of the Board of Directors of HV Bancorp, Inc. (the Company), you are receiving the attached 401(k) Plan Vote
Authorization Form to convey to Pentegra Trust Company (the 401(k) Plan Trustee) your voting instructions with respect to shares of the Companys common stock allocated to your account in the Huntingdon Valley Bank 401(k) Profit
Sharing Plan and Trust (the 401(k) Plan) on the proposal to be presented at the Companys Special Meeting of Stockholders to be held at Huntingdon Valley Bank at 1388 West Street Road, Warminster, PA 18974 on Wednesday,
June 13, 2018 at 3:00 p.m., Eastern Time (ET). The 401(k) Plan allows participants to direct the 401(k) Plan Trustee how to vote the common stock allocated to the participants 401(k) Plan account. As a
participant in the 401(k) Plan with an investment in the HV Bancorp Stock Fund as of May 2, 2018, the record date for the Special Meeting, you are entitled to instruct the 401(k) Plan Trustee how to vote the shares of Company common stock
allocated to your account at the Special Meeting by completing and returning the 401(k) Plan Vote Authorization Form. Mediant is the agent that will receive the 401(k) Plan Vote Authorization Forms and tabulate the results. In order to direct the
voting of the shares allocated to your account, you must either complete, sign and date the 401(k) Plan Vote Authorization Form and return it in the accompanying postage-paid envelope to Mediant or you may provide your voting instructions via the
Internet or by telephone, as described on the enclosed 401(k) Vote Authorization Form. In any event your voting instructions must be received no later than 11:59 p.m., ET, on June 10, 2018. The 401(k) Plan Trustee will vote the shares of
Company common stock held in the 401(k) Plan in accordance with the timely received and completed voting instructions received from participants, so long as such vote is in accordance with the provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA). YOUR VOTIng InSTRUcTIOnS MUST BE REcEIVED BY MEDIAnT nO LATER THAn 11:59 P.M, EASTERn TIME, JUnE 10, 2018. YOUR InDIVIDUAL VOTE WILL nOT BE REVEALED TO THE cOMPAnY. Your confidential vote and the
votes of other participants will be tallied by Mediant and the results provided to the 401(k) Plan Trustee who will: 1. Vote the shares for which voting instructions are timely received in accordance with such instructions;
and 2. Vote the shares as to which no timely instructions have been received, in the same proportion as shares for which the Trustee has received timely voting instructions, subject to its fiduciary duties under ERISA. If you
do not direct the 401(k) Plan Trustee how to vote the shares of Company common stock allocated to your account, the 401(k) Plan Trustee will vote your shares in a manner calculated to most accurately reflect the instructions it receives from other
participants, subject to its fiduciary duties.