UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. _____)
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Filed
by the Registrant [ X ]
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Filed
by a Party other than the
Registrant [ ]
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Check
the appropriate box:
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[
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[ X]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to '
240.14a-12
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Quaint
Oak Bancorp, Inc.
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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[
X]
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
schedule or registration statement no.:
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(3)
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Filing
party:
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(4)
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Date
filed:
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April 11,
2008
Dear
Shareholder:
You are
cordially invited to attend the Annual Meeting of Shareholders of Quaint Oak
Bancorp, Inc. The meeting will be held at our headquarters, located
at Lakeside Office Park, 607 Lakeside Drive, Southampton, Pennsylvania on
Wednesday, May 14, 2008 at 2:00 p.m., Eastern time. The matters to be
considered by shareholders at the annual meeting are described in the
accompanying materials.
It is
very important that your shares be voted at the annual meeting regardless of the
number you own or whether you are able to attend the meeting in
person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the annual
meeting. This will not prevent you from voting in person, but will
ensure that your vote is counted if you are unable to
attend.
On behalf
of the Board of Directors and all of the employees of Quaint Oak Bancorp, I
thank you for your continued interest and support.
Sincerely,
Robert
T. Strong
President and Chief Executive
Officer
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DRIVING
DIRECTIONS
Lakeside Office
Park is located at the intersection of Route 132 (Street Road) and Mill
Creek Drive.
The
entrance is across from Mill Creek Drive; and we are located at the
southeast corner of the office park.
If
you are driving from:
I-95 and Street
Road: proceed west on Street Road approximately 7
miles.
Pennsylvania Turnpike and Route 1
South: proceed west on Street Road approximately 2 ½
miles.
Bustleton Avenue: proceed
north on Bustleton Avenue to Street Road. Turn left and proceed
approximately one mile.
Huntingdon Pike (Route
232): proceed north on Huntingdon Pike to Street
Road. Turn right and proceed approximately 1.8
miles.
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QUAINT
OAK BANCORP, INC.
Lakeside
Office Park
607
Lakeside Drive
Southampton,
Pennsylvania 18966
(215)
364-4059
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NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
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TIME
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2:00 p.m., Eastern
time, Wednesday, May 14, 2008
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PLACE .
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. .
. .
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Quaint
Oak Bank
Lakeside
Office Park
607
Lakeside Drive
Southampton,
Pennsylvania 18966
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ITEMS
OF BUSINESS . .
. .
. . .
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(1) |
To
elect three directors for a three-year term expiring in 2011, and until
their successors are elected and qualified;
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To
consider and approve the adoption of the 2008 Stock Option
Plan;
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To
consider and approve the adoption of the 2008 Recognition and Retention
Plan and Trust Agreement;
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To
ratify the appointment of Beard Miller Company LLP as our independent
registered public accounting firm for the fiscal year ending December 31,
2008; and
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To
transact such other business, as may properly come before the meeting or
at any adjournment thereof. We are not aware of any other such
business.
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RECORD
DATE . .
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Holders
of Quaint Oak Bancorp common stock of record at the close of business on
March 31, 2008, are entitled to vote at the meeting.
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PROXY
VOTING . .
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. .
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It
is important that your shares be represented and voted at the
meeting. You can vote your shares by completing and returning
the proxy card sent to you. Most shareholders whose shares are
held in “street” name can also vote their shares over the Internet or by
telephone. If Internet or telephone voting is available to you,
voting instructions are printed on the proxy card sent to
you. You can revoke a proxy at any time prior to its exercise
at the meeting by following the instructions in the accompanying proxy
statement.
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Southampton,
Pennsylvania
April
11, 2008
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BY
ORDER OF THE BOARD OF DIRECTORS
 Diane
J. Colyer
Corporate
Secretary
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TABLE
OF CONTENTS
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Page
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About
the Annual Meeting of Shareholders
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1
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Information
with Respect to Nominees for Director, Continuing Directors
and
Executive
Officers
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3
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Election of
Directors (Proposal One)
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3
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Directors Whose
Terms Are Continuing
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4
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Executive Officers
Who Are Not Directors
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4
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Committees and
Meetings of the Board of Directors
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5
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Director
Nominations
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6
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Director
Compensation
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6
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Directors'
Attendance at Annual Meetings
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7
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Transactions With
Certain Related Persons
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7
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Report
of the Audit Committee
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7
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Executive
Compensation
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8
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Summary Compensation
Table
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8
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Employment
Agreement
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8
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Beneficial
Ownership of Common Stock by Certain Beneficial Owners and
Management
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10
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Section 16(a)
Beneficial Ownership Reporting Compliance
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11
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Proposal
to adopt the 2008 Stock Option Plan (Proposal Two)
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11
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Proposal
to adopt the 2008 Recognition and Retention Plan and Trust Agreement
(Proposal Three)
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15
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Ratification
of Appointment of Independent Registered Public Accounting
Firm
(Proposal
Four)
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17
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Audit
Fees
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17
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Shareholder
Proposals, Nominations and Communications with the Board of
Directors
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18
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Annual
Reports
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19
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Other
Matters
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19
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Appendix
A – 2008 Stock Option Plan
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A-1
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Appendix
B – 2008 Recognition and Retention Plan and Trust
Agreement
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B-1
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PROXY
STATEMENT
OF
QUAINT
OAK BANCORP, INC.
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ABOUT
THE ANNUAL MEETING OF SHAREHOLDERS
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We are
furnishing this proxy statement to holders of common stock of Quaint Oak
Bancorp, Inc., the parent holding company of Quaint Oak Bank. Proxies are being
solicited on behalf of our Board of Directors for use at the Annual Meeting of
Shareholders to be held at our headquarters located at Lakeside Office Park, 607
Lakeside Drive, Southampton, Pennsylvania on Wednesday, May 14, 2008 at 2:00
p.m., Eastern time, and at any adjournment thereof for the purposes set forth in
the attached Notice of Annual Meeting of Shareholders. This proxy
statement is first being mailed to shareholders on or about April 11,
2008.
What
is the purpose of the annual meeting?
At our
annual meeting, shareholders will act upon the matters outlined in the Notice of
Annual Meeting on the cover page of this proxy statement, including the election
of directors, adoption of the 2008 Stock Option Plan, adoption of the 2008
Recognition and Retention Plan and Trust Agreement and ratification of our
independent registered public accounting firm. In addition,
management will report on the performance of Quaint Oak Bancorp and respond to
questions from shareholders.
Who
is entitled to vote?
Only our
shareholders of record as of the close of business on the voting record date for
the meeting, March 31, 2008, are entitled to vote at the meeting. On the record
date, we had 1,388,625 shares of common stock issued and outstanding and no
other class of equity securities outstanding. For each issued and
outstanding share of common stock you own on the record date, you will be
entitled to one vote on each matter to be voted on at the meeting, in person or
by proxy.
How
do I submit my proxy?
After you
have carefully read this proxy statement, indicate on your proxy form how you
want your shares to be voted. Then sign, date and mail your proxy
form in the enclosed prepaid return envelope as soon as
possible. This will enable your shares to be represented and voted at
the annual meeting.
Can
I attend the annual meeting and vote my shares in person?
Yes. All shareholders are invited to attend
the annual meeting. Shareholders of record can vote in person at the
annual meeting. If your shares are held in street name, then you are
not the shareholder of record and you must ask your broker or other nominee how
you can vote at the annual meeting.
Can
I change my vote after I return my proxy card?
Yes. If you have not voted through your
broker or other nominee, there are three ways you can change your vote or revoke
your proxy after you have sent in your proxy form.
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First,
you may send a written notice to the Secretary of Quaint Oak Bancorp, Ms.
Diane J. Colyer, Corporate Secretary, Quaint Oak Bancorp, Lakeside Office
Park, 607 Lakeside Drive, Southampton, Pennsylvania 18966, stating that
you would like to revoke your
proxy.
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Second,
you may complete and submit a new proxy form. Any earlier
proxies will be revoked
automatically.
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Third,
you may attend the annual meeting and vote in person. Any
earlier proxy will be revoked. However, attending the annual
meeting without voting in person will not revoke your
proxy.
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If you
have instructed a broker or other nominee to vote your shares, you must follow
directions you receive from your broker or other nominee to change your
vote.
What
constitutes a quorum?
The
presence at the annual meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum. Proxies received but marked as abstentions and
broker non-votes will be included in the calculation of the number of votes
considered to be present at the meeting.
What
are the Board of Directors' recommendations?
The
recommendations of the Board of Directors are set forth under the description of
each proposal in this proxy statement. In summary, the Board of
Directors recommends that you vote FOR the nominees for director described
herein, FOR the 2008 Stock Option Plan, FOR the 2008 Recognition and Retention
Plan and Trust Agreement and FOR ratification of the appointment of Beard Miller
Company LLP for fiscal 2008.
The proxy
solicited hereby, if properly signed and returned to us and not revoked prior to
its use, will be voted in accordance with your instructions contained in the
proxy. If no contrary instructions are given, each proxy signed and
received will be voted in the manner recommended by the Board of Directors and,
upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Proxies solicited hereby may be exercised only at the annual
meeting and any adjournment of the annual meeting and will not be used for any
other meeting.
What
vote is required to approve each item?
Directors
are elected by a plurality of the votes cast with a quorum (a majority of the
outstanding shares entitled to vote represented in person or by proxy)
present. The three persons who receive the greatest number of votes
of the holders of common stock represented in person or by proxy at the annual
meeting will be elected directors. The affirmative vote of a majority
of the total shares outstanding and entitled to vote at the annual meeting is
required for approval of the proposals to adopt the 2008 Stock Option Plan and
adopt the 2008 Recognition and Retention Plan and Trust
Agreement. The affirmative vote of a majority of the total votes
present in person and by proxy is required for approval of the proposal to
ratify the appointment of the independent registered public accounting
firm.
Because
of the required vote to adopt the 2008 Stock Option Plan and 2008 Recognition
and Retention Plan, abstentions and "broker non-votes" will have the same effect
as a vote against these proposals. And for the same reason, the
failure of any Quaint Oak Bancorp shareholder to vote by proxy or in person at
the annual meeting will also have the effect of a vote against the proposals to
adopt the stock plans. Under the Pennsylvania Business Corporation
Law, an abstention or broker non-vote is not counted as a vote cast and
accordingly, will have no effect on the vote to elect directors or ratify the
appointment of our independent registered public accounting
firm.
-2-
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INFORMATION
WITH RESPECT TO NOMINEES FOR DIRECTOR,
CONTINUING
DIRECTORS AND EXECUTIVE OFFICERS
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Election
of Directors (Proposal One)
Our
Articles of Incorporation provide that the Board of Directors will be divided
into three classes as nearly equal in number as the then total number of
directors constituting the Board of Directors permits. The directors
are elected by our shareholders for staggered terms, or until their successors
are elected and qualified. At the annual meeting, shareholders of
Quaint Oak Bancorp will be asked to elect one class of directors, consisting of
three directors, for a three-year term expiring in 2011, and until their
successors are elected and qualified.
No
director is related to any other director or executive officer by first cousin
or closer, except Messrs. Ager and DiPiero who are
brothers-in-law. Each nominee and each director whose term continues
currently serves as a director of Quaint Oak Bancorp and its subsidiary, Quaint
Oak Bank.
Unless
otherwise directed, each proxy executed and returned by a shareholder will be
voted for the election of the nominees for director listed below. If
any person named as a nominee should be unable or unwilling to stand for
election at the time of the annual meeting, the proxies will nominate and vote
for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason
why any of the nominees listed below may not be able to serve as a director if
elected.
The
following tables present information concerning the nominees for director and
each director whose term continues, including tenure as a
director. Terms as directors for Messrs. Ager, Augustine, DiPiero,
Gant, Phillips, Spink and Strong include service as a director of Quaint Oak
Bank. Ages are reflected as of March 31, 2008.
Nominees for Director for a Three-Year Term Expiring in
2011
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Name
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Age
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Position
with Quaint Oak and Principal Occupation
During
the Past Five Years
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Director
Since
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George
M. Ager, Jr.
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71
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Director. Previously,
Vice Chairman of the Board of Quaint Oak Bank from 1984 to April
2007. Currently retired.
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1968
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James
J. Clarke, Ph.D.
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66
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Director. Principal
of Clarke Consulting, Villanova, Pennsylvania, a financial institution
consulting firm specializing in asset/liability management, strategic
planning and board/management education, since 2002. Prior thereto, Mr.
Clarke served as Professor of Finance and Economics, Villanova University
from 1972 to 2002.
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2007
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Marsh
B. Spink
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69
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Director. Managing
Partner of Lawn-Crest Realty, Philadelphia, Pennsylvania since
1962.
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1988
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The
Board of Directors recommends that you vote FOR
election of the nominees for Director.
-3-
Directors
Whose Terms Are Continuing
Directors
with a Term Expiring in 2009
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Name
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Age
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Position
with Quaint Oak and Principal Occupation
During
the Past Five Years
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Director
Since
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Andrew
E. DiPiero, Jr. Esq.
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55
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Director. Partner
with Stampone, D'Angelo, Renzi, DiPiero, Attorneys at Law, P.C.,
Cheltenham, Pennsylvania, since June 2004. Previously, attorney
with Master & Weinstein, P.C., Philadelphia, Pennsylvania from June
1998 to May 2004.
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1984
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Robert
J. Phillips
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61
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Chairman
of the Board of Quaint Oak Bancorp and Quaint Oak Bank since 2007 and
1984, respectively. Partner, Phillips and Phillips Enterprises,
Doylestown, Pennsylvania since March 2005. Previously, President, Shipping
Connections, Inc., Bristol, Pennsylvania from October 1996 to October
2003.
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1968
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Directors
with a Term Expiring in 2010
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Name
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Age
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Position
with Quaint Oak and Principal Occupation
During
the Past Five Years
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Director
Since
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John
J. Augustine, CPA
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55
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Director. Senior
Manager of Teleflex, Inc., Limerick, Pennsylvania since February 2006;
previously, a self employed consultant for JJA Consulting, Lansdale,
Pennsylvania from January 2004 to February 2006; prior thereto, Executive
Vice President and Chief Financial Officer of Reda Sports, Inc., West
Easton, Pennsylvania from March 1997 to January 2004. Mr. Augustine has 18
years of service with financial institutions, including serving as Vice
President and Controller for Vista Bancorp, Inc., and Assistant Controller
of Germantown Savings Bank.
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2000
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Kenneth
R. Gant, MBA
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49
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Director. Non-employee
Secretary of Quaint Oak Bank's Board through June
2007. Currently, Associate Agent of Landis Agencies, Doylestown,
Pennsylvania; previously, Owner, Gant Insurance Agency, Doylestown,
Pennsylvania from September 2006 to December 2007. Prior thereto, Agency
Development Manager, National Grange Insurance Company, Keene, New
Hampshire from February 2005 to April 2006; consultant for Quaint Oak Bank
from July 2003 to February 2005; previously Chief Operating Officer, GMG
Insurance Agency, Newtown, Pennsylvania, from 1980 to June
2003.
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1986
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Robert
T. Strong
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61
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Director. President
and Chief Executive Officer of Quaint Oak Bancorp and Quaint Oak Bank
since March 2007 and June 2001, respectively. Previously, Owner
and President of Strong Financial Corporation, Southampton, Pennsylvania
from 2000 through 2006. Prior thereto, Mr. Strong primarily
engaged in residential mortgage lending as Senior Vice President of Prime
Bank, Fort Washington, Pennsylvania.
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2000
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Executive
Officers Who Are Not Directors
Set forth
below is information with respect to the principal occupations during the last
five years for the three executive officers of Quaint Oak Bancorp and Quaint Oak
Bank who do not also serve as directors of Quaint Oak Bancorp. Ages
are reflected as of March 31, 2008.
Diane J.
Colyer, age 49 years, has served as Operations Officer and Corporate
Secretary of Quaint Oak Bancorp since March 2007 and April 2007,
respectively. Ms. Colyer also has served as Operations Officer of
Quaint Oak Bank since August 1999, System Security Officer since July 2000,
Network Administrator since May 2001 and Corporate Secretary since April
2007. From May 2002 through April 2006, Ms. Colyer served as
Compliance Officer, Security Officer and Community Reinvestment Act Officer of
Quaint Oak Bank. From April 2005 to April 2007, Ms. Colyer served as
Assistant Secretary.
-4-
Robert
Farrer, age 42 years, has served as Compliance Officer, Security Officer,
Bank Secrecy Act Officer and Community Reinvestment Act Officer of Quaint Oak
Bank since April 2006 and Manager – Customer Service since December
2004. Prior thereto, Mr. Farrer served as Bank Branch Manager and
Assistant Vice President of Bank of America, Jenkintown, Pennsylvania, from
September 1986 to December 2004.
Curt T.
Schulmeister,
age 50 years, has served as Chief Lending Officer of Quaint Oak Bank since
February 2007. Previously, Mr. Schulmeister served as Executive Vice
President and Chief Lending Officer of Earthstar Bank, Southampton, Pennsylvania
since June 2001. Prior thereto, Mr. Schulmeister primarily engaged in
consumer lending as Senior Vice President of Prime Bank, Fort Washington,
Pennsylvania.
Committees
and Meetings of the Board of Directors
The Board
of Directors of Quaint Oak Bancorp has established a Compensation Committee,
Audit Committee and Nominating and Corporate Governance Committee. During the
fiscal year ended December 31, 2007, the Board of Directors of Quaint Oak
Bancorp held three regular meetings and two special meetings. No
director attended fewer than 75% of the total number of Board meetings and
committee meetings on which he served that were held during this
period. The Board of Directors has determined that a majority of its
members are independent directors as "independent director" is defined in the
Nasdaq listing standards. Our independent directors are Messrs. Ager,
Clarke, DiPiero, Gant, Phillips and Spink.
Compensation
Committee. The members of the Compensation Committee were
Messrs. Clarke, DiPiero and Phillips in fiscal 2007. The Compensation
Committee reviews the compensation of our executive officers and met three times
in 2007. No member of the Compensation Committee is a current or
former officer or employee of Quaint Oak Bancorp or Quaint Oak
Bank. The Compensation Committee has adopted a written charter which
is available on our website at www.quaintoak.com.
Audit
Committee. The primary purpose of the Audit Committee, as set
forth in the committee's charter, is to assist the Board of Directors in
fulfilling its fiduciary responsibilities relating to corporate accounting and
reporting practices. The Audit Committee reviews with management and
the independent auditors the systems of internal control, reviews the annual
financial statements, including the Annual Report on Form 10-K, and monitors our
adherence in accounting and financial reporting to generally accepted accounting
principles. The Audit Committee is comprised of three outside
directors, Messrs. DiPiero, Gant and Phillips. The Board of Directors
has not identified a member of the audit committee who meets the Securities and
Exchange Commission's definition of audit committee financial
expert. The Board of Directors believes that the audit committee
members have sufficient expertise to fulfill their fiduciary
duties.
The Audit
Committee meets on an as needed basis and met five times in fiscal
2007. The Board of Directors and the Audit Committee adopted an Audit
Committee Charter which is available on our website at
www.quaintoak.com.
Nominating and
Corporate Governance Committee. The members of the Nominating
and Corporate Governance Committee of Quaint Oak Bancorp for fiscal 2007 were
Messrs. Gant, Phillips and Spink. The Nominating and Corporate
Governance Committee did not meet during fiscal 2007 and met once during fiscal
2008 with respect to the nominees for this first annual
meeting. Nominations for director of Quaint Oak Bancorp are reviewed
by the Nominating and Corporate Governance Committee and submitted to the full
Board of Directors for approval. The
Charter of the Nominating and Corporate Governance Committee is available on our
website at www.quaintoak.com.
-5-
Director
Nominations
The
Nominating and Corporate Governance Committee's charter sets forth certain
criteria the committee may consider when recommending individuals for nomination
including: ensuring that the Board of Directors, as a whole, is diverse and
consists of individuals with various and relevant career experience, relevant
technical skills, industry knowledge and experience, financial expertise
(including expertise that could qualify a director as a "financial expert," as
that term is defined by the rules of the SEC), local or community ties, minimum
individual qualifications, including strength of character, mature judgment,
familiarity with our business and industry, independence of thought and an
ability to work collegially. The committee also may consider the
extent to which the candidate would fill a present need on the Board of
Directors. The Nominating and Corporate Governance Committee will
also consider candidates for director suggested by other directors, as well as
our management and shareholders. A shareholder who desires to
recommend a prospective nominee should notify our Corporate Secretary in writing
providing whatever supporting material the shareholder considers
appropriate. Procedures for shareholder nominations are discussed
under "Shareholder Proposals, Nominations and Communications with the Board of
Directors."
Director
Compensation
Members
of our Board of Directors receive no compensation for attending meetings of
Quaint Oak Bancorp's Board. During 2007, each director of Quaint Oak
Bank received an annual retainer of $3,600, which increased to $4,800 for 2008,
and received $600 for each meeting of the Board of Directors, with one paid
absence permitted per year. For all committees, other than Audit,
members received $250 for each committee meeting. Members of the
Audit Committee received $500 per meeting and the Chair received
$600. Mr. Clarke, as Chair of Quaint Oak Bancorp's Asset and
Liability Committee ("ALCO"), received $600 per committee
meeting. The other ALCO members, who are also executive officers, did
not receive meeting fees. Committee fees are paid only if the meeting
is attended. In addition to an annual retainer and meeting fees, the
Chairman of the Board received a fee of $2,167 per month during fiscal 2007,
which increased to $2,267 in fiscal 2008.
Director
Compensation Table. The following table sets forth total
compensation paid to each director of Quaint Oak Bank during fiscal 2007, other
than Mr. Strong whose compensation is set forth below under "Executive
Compensation." Quaint Oak Bank does not have a defined benefit
pension plan or retirement plan for the benefit of
directors.
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Name
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Board/Committee
Fees
Earned or Paid in Cash
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All
Other
Compensation
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Total
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George
M. Ager,
Jr.
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$ | 15,800 | $ | 486 | (1) | $ | 16,286 | |||||
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John
J. Augustine,
CPA
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12,000 | 41,704 | (2) | 53,704 | ||||||||
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James
J. Clarke,
Ph.D.(3)
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10,700 | -- | 10,700 | |||||||||
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Andrew
E. DiPiero, Jr.,
Esq.
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16,000 | -- | 16,000 | |||||||||
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Kenneth
R. Gant,
MBA
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16,400 | -- | 16,400 | |||||||||
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Robert
J.
Phillips
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42,650 | 2,275 | (4) | 44,925 | ||||||||
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Marsh
B.
Spink
|
15,550 | -- | 15,550 | |||||||||
|
________________________
|
|
|
(1)
|
Represents
fees paid for the inspection of properties underlying construction
loans.
|
| (2) | Represents fees paid for accounting and consulting services. |
| (3) | Appointed to the board of directors in April 2007. |
| (4) | Represents fees paid for business development, inspection of properties and CRA. |
-6-
Service
Agreements. During the year ended December 31, 2007, each
director of Quaint Oak Bank, other than Messrs. Clarke and DiPiero, was a party
to a service agreement with Quaint Oak Bank. The Administrative
Services and Facilities Agreements between Quaint Oak Bank and Messrs. Ager,
Gant, Phillips and Spink were terminated in April 2007 in view of our decision
to convert to a stock form institution and the addition of a credit analyst and
chief lending officer. Mr. Augustine's Service Agreement is
terminable by either Mr. Augustine or Quaint Oak Bank at any time upon written
notice to the other party and is reviewed at least annually by the board of
directors.
Mr. Ager's
agreement provided for inspections of properties securing construction loans and
other services as requested.
Compensation was at a rate of $25.00 per hour and $75.00
per inspection. Mr. Gant's and Mr. Phillips's agreements were to
provide office clerical support and business development services, respectively,
at a rate of $25.00 per hour. The Service Agreement with Mr. Spink
provided for loan production services for which he was compensated at a rate of
½ of 1% on the dollar amount of loans settled. Under Mr. Augustine's
agreement, he is compensated for accounting and consulting services at a rate of
$75.00 per hour for 2007, which increased to $80.00 per hour for fiscal
2008.
Directors'
Attendance at Annual Meetings
Although
we do not have a formal policy regarding attendance by members of the Board of
Directors at annual meetings of shareholders, we expect that our directors will
attend, absent a valid reason for not doing so. This is our first
annual meeting of shareholders.
Transactions
With Certain Related Persons
Our
policies provide that all loans made by Quaint Oak Bank to our directors,
officers and employees are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present other unfavorable
features. All such loans made to our directors and executive officers
met such criteria.
|
REPORT
OF THE AUDIT COMMITTEE
|
The Audit
Committee has reviewed and discussed Quaint Oak Bancorp's audited financial
statements with management. The Audit Committee has discussed with
the independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61, "Communication with Audit
Committees." The Audit Committee has received the written disclosures
and the letter from the independent registered public accounting firm required
by Independence Standards Board Standard No. 1, as may be modified or
supplemented, and has discussed with the independent registered public
accounting firm, their independence. Based on the review and
discussions referred to above in this report, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in
Quaint Oak Bancorp's Annual Report on Form 10-K for fiscal year ended December
31, 2007, for filing with the Securities and Exchange
Commission.
Members of
the Audit Committee
Andrew E.
DiPiero, Jr., Esq.
Kenneth R.
Gant, MBA
Robert J.
Phillips
-7-
|
EXECUTIVE
COMPENSATION
|
Summary
Compensation Table
The
following table shows the compensation paid by Quaint Oak Bank to our President
and Chief Executive Officer and Chief Lending Officer for the years ended
December 31, 2007 and 2006. No other executive officer of Quaint Oak
Bank received total compensation in excess of $100,000 during fiscal 2007 or
2006.
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
All
Other
Compensation(1)(2)
|
Total
|
|||||||||||||
|
Robert
T. Strong
|
2007
|
$ | 220,000 | $ | 30,000 | $ | 20,487 | $ | 270,487 | |||||||||
|
President and Chief Executive
Officer
|
2006
|
130,000 | 30,000 | 10,000 | 170,000 | |||||||||||||
|
Curt
T. Schulmeister
|
2007
|
99,519 | 16,000 | -- | 110,519 | |||||||||||||
|
Chief Lending Officer since
February 2007
|
2006
|
-- | -- | -- | -- | |||||||||||||
_____________________
|
(1)
|
All
other compensation does not include amounts attributable to other
miscellaneous benefits received by Mr. Strong. The costs to
Quaint Oak Bank of providing such benefits during fiscal 2007 did not
exceed $10,000.
|
|
(2)
|
Represents
fees paid in 2007 and 2006 for service as a director of Quaint Oak Bank
and for 2007, includes the value of shares allocated to Mr. Strong's
account in the employee stock ownership
plan.
|
The
Compensation Committee approved a base salary of $220,000 for Mr. Strong in
fiscal 2007, an increase of $90,000, over his base salary of $130,000 for fiscal
2006. The dollar amount of his base salary was determined by the
Compensation Committee's review of the local market for chief executive officer
compensation and was intended to ensure that Quaint Oak Bank remained
competitive in attracting and retaining a qualified chief executive
officer. The Compensation Committee also considered that Quaint Oak
Bank had terminated its previous service agreement with Mr. Strong's mortgage
company under which he received compensation of $88,935 in fiscal
2006. In light of the transition of Mr. Strong to full employment by
Quaint Oak Bank, the hiring of a chief lending officer and the decision to
convert to a stock form institution, the Board of Directors and Mr. Strong
agreed effective December 31, 2006 to terminate the service agreement with
Strong Financial Corporation and to adjust Mr. Strong's salary
accordingly. The Compensation Committee considered that Quaint Oak
Bank met its budget for the year when determining to award a bonus of $30,000 to
Mr. Strong in fiscal 2007. In addition, in fiscal 2007, Mr. Strong
received dues and membership fees for a local country club as a means of
supporting business development.
Employment
Agreement
On
November 12, 2003, Quaint Oak Bank entered into an employment agreement with
Robert T. Strong, President and Chief Executive Officer, for a term of three
years. The term of the employment agreement is automatically extended
each year for a successive additional one-year period, unless either party gives
written notice not less than thirty (30) days nor more than ninety (90) days
prior to the annual anniversary date, not to extend the employment
term. The employment agreement was amended on March 19, 2007 to,
among other items, clarify that the conversion will not be considered a change
in control of Quaint Oak Bank. Mr. Strong is also eligible for a
bonus in such amount as determined by the board of directors at their
discretion. The agreement also provides that Mr. Strong may
participate in employee benefit plans, currently consisting only of life
insurance, shall be reimbursed for expenses incurred in performing his duties as
President and Chief Executive Officer and shall be entitled to four weeks of
paid vacation each year and ten days of paid sick leave subject to such
increases as the board of directors may approve.
-8-
The
employment agreement is terminable with or without cause by Quaint Oak Bank. The
executive has no right to compensation or other benefits pursuant to the
employment agreement for any period after termination by Quaint Oak Bank for
cause, as defined in the agreement. In the event that the employment
agreement is terminated by Quaint Oak Bank other than for cause or by Mr. Strong
as a result of certain adverse actions which are taken with respect to his
employment following a change in control, as defined, of Quaint Oak Bank, then
Mr. Strong will be entitled to a lump sum cash severance amount equal to 2.99
times his average annual compensation for the last three calendar years, subject
to reduction pursuant to Section 280G of the Internal Revenue Code, as set forth
below, in the event of a change in control.
A change
in control is generally defined in the employment agreement to mean a change in
the ownership of Quaint Oak Bancorp or Quaint Oak Bank or a change in the
ownership of a substantial portion of the assets of Quaint Oak Bancorp or Quaint
Oak Bank, in each case as provided under Section 409A of the Internal Revenue
Code of 1986, as amended and the regulations thereunder.
The
employment agreement provides that, in the event any of the payments to be made
thereunder are deemed to constitute "parachute payments" within the meaning of
Section 280G of the Internal Revenue Code, then such payments and benefits shall
be reduced by the minimum necessary to result in the payments not exceeding
three times Mr. Strong's average annual compensation from Quaint Oak Bank that
was includable in his gross income during the most recent five taxable
years. As a result, the severance payment in the event of a change in
control will not be subject to a 20% excise tax, and Quaint Oak Bank will be
able to deduct such payment as compensation expense for federal income tax
purposes.
In the
event the employment agreement is terminated by Quaint Oak Bank other than for
cause and other than following a change in control or by Mr. Strong due to
failure of Quaint Oak Bank to comply with a material provision which is not
corrected within ten days' notice or Quaint Oak Bank attempts to terminate Mr.
Strong's employment without complying with the notice provisions, then Quaint
Oak Bank will pay three times his compensation at the date of termination over a
thirty-six (36) month period. Upon death or disability, Quaint Oak
Bank shall pay Mr. Strong or his estate or legal representative, his
compensation under the agreement for a period of one year and any prorated
portion of a bonus that would have been paid if he had remained employed for the
full calendar year.
-9-
|
BENEFICIAL
OWNERSHIP OF COMMON STOCK
BY
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
The
following table sets forth, as of March 31, 2008, the voting record date,
certain information as to our common stock beneficially owned by (a) each person
or entity, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 who or which was known to us to be the
beneficial owner of more than 5% of our issued and outstanding common stock, (b)
our directors, (c) certain executive officers, and (d) all directors and
executive officers as a group.
|
Common
Stock Beneficially Owned as
of
March 31, 2008(1)
|
||||||||
|
Name
of Beneficial Owner
|
Amount
|
Percentage
|
||||||
|
Quaint
Oak Bancorp, Inc. Employee Stock Ownership Plan Trust
|
111,090
|
(2)
|
8.0 | % | ||||
|
607 Lakeside Drive
Southampton, Pennsylvania
18966
|
||||||||
| Black River BancVenture, Inc. | ||||||||
|
8245 Tournament Drive, Suite
270
Memphis, Tennessee
38125
|
70,667 | (3) | 5.1 | |||||
|
Directors:
|
||||||||
|
George M. Ager,
Jr.
|
7,500 | (4) | * | |||||
|
John J. Augustine,
CPA
|
9,000 | (5) | * | |||||
|
James J. Clarke,
Ph.D.
|
2,000 | * | ||||||
|
Andrew E. DiPiero, Jr.,
Esq.
|
6,000 | (6) | * | |||||
|
Kenneth R. Gant,
MBA
|
11,600 | (7) | * | |||||
|
Robert J.
Phillips
|
10,000 | (8) | * | |||||
|
Marsh B.
Spink
|
13,000 | (9) | * | |||||
|
Robert T.
Strong
|
27,454 | (10) | 1.9 | |||||
|
Other
Named Executive Officer:
|
||||||||
|
Curt T.
Schulmeister
|
500 | (11) | * | |||||
|
All
directors and executive officers as a group (11 persons)
|
89,392 | 6.3 | % | |||||
____________________
* Represents
less than 1% of our outstanding common stock.
|
(1)
|
Based
upon filings made with the Securities and Exchange Commission and
information furnished by the respective individuals. Under
regulations promulgated pursuant to the Securities and Exchange Act,
shares of common stock are deemed to be beneficially owned by a person if
he or she directly or indirectly has or shares (a) voting power, which
includes the power to vote or to direct the voting of the shares, or (b)
investment power, which includes the power to dispose or to direct the
disposition of the shares. Unless otherwise indicated, the
named beneficial owner has sole voting and dispositive power with respect
to the shares.
|
|
(2)
|
Messrs.
Robert T. Strong and John J. Augustine and Ms. Diane J. Colyer act as
trustees of the Quaint Oak Bancorp, Inc. Employee Stock Ownership Plan
Trust. As of March 31, 2008, 1,851 shares held in the plan
trust were allocated to the accounts of participating employees and
109,239 shares were held, unallocated, for allocation in future
years. In general, the allocated shares held in the plan trust
as of March 31, 2008, will be voted by the plan trustees in accordance
with the instructions of the participants. Any unallocated shares are
generally required to be voted by the plan trustees in the same proportion
as shares which have been allocated to participants are directed to be
voted, subject to each case to the fiduciary duties of the plan trustees
and applicable law. The amount of our common stock beneficially
owned by officers who serve as plan trustees and by all directors and
executive officers as a group does not include the shares held by the plan
trust other than shares specifically allocated to the individual officer’s
account.
|
|
(3)
|
Based
on information obtained from an amended Schedule 13G filed by Black River
BancVenture, Inc. with the SEC on December 7, 2007. Black River
BancVenture, Inc. reports sole voting and dispositive power with respect
to the 70,667 shares.
|
(Footnotes
continued on following page)
-10-
____________________
(4) The
7,500 shares are held jointly with Mr. Ager's spouse.
|
(5)
|
Includes
1,500 shares held by Mr. Augustine's spouse and 7,500 shares held in Mr.
Augustine's individual retirement
account.
|
(6) Includes
1,000 shares held by Mr. DiPiero's spouse.
(7) Includes
10,000 shares held in Mr. Gant's individual retirement account and 1,600 shares
held by Mr. Gant's children.
(8) Includes
9,042 shares held jointly with Mr. Phillips's spouse and 330 shares held by his
spouse.
(9) Includes
1,000 shares held jointly with Mr. Spink's spouse.
|
(10)
|
Includes
25,000 shares held jointly with Mr. Strong's spouse, 1,500 shares held in
Mr. Strong's individual retirement account and 954 shares allocated to Mr.
Strong's account in the employee stock ownership
plan.
|
|
(11)
|
The
500 shares are held in Mr. Schulmeister's individual retirement
account.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than 10% of Quaint Oak Bancorp, Inc.'s
common stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by regulation to furnish us with copies of
all Section 16(a) forms they file. We know
of no person who owns 10% or more of our common stock.
Based
solely on review of the copies of such forms furnished to us, or written
representations from our officers and directors, we believe that during, and
with respect to, fiscal 2007, our officers and directors complied in all
respects with the reporting requirements promulgated under Section 16(a) other
than Mr. Schulmeister who was late reporting one purchase on Form
4.
|
PROPOSAL
TO ADOPT THE 2008 STOCK OPTION PLAN (Proposal
Two)
|
General
On
February 13, 2008, the Board of Directors adopted the 2008 Stock Option Plan,
which is designed to attract and retain qualified officers, employees and
non-employee directors, provide officers, employees and non-employee directors
with a proprietary interest in Quaint Oak Bancorp as an incentive to contribute
to our success and reward officers, employees and non-employee directors for
outstanding performance. The Stock Option Plan provides for the grant
of incentive stock options intended to comply with the requirements of Section
422 of the Internal Revenue Code and non-qualified or compensatory stock options
(the incentive stock options and the non-qualified (compensatory) options are
together called, the "options"). Options will be available for grant
to officers, employees and directors of Quaint Oak Bancorp, Quaint Oak Bank and
any subsidiary except that non-employee directors will be eligible to receive
only awards of non-qualified options. The Board of Directors believes
that the Stock Option Plan is in the best interest of Quaint Oak Bancorp and our
shareholders. If shareholder approval is obtained, options to acquire
shares of common stock will be granted to officers, employees and non-employee
directors of Quaint Oak Bancorp and Quaint Oak Bank with an exercise price equal
to the fair market value of the common stock on the date of
grant.
-11-
Description
of the Stock Option Plan
The
following description of the Stock Option Plan is a summary of its terms and is
qualified in its entirety by reference to the Stock Option Plan, a copy of which
is attached hereto as Appendix
A.
Administration.
The Stock Option Plan will be administered and interpreted by a committee
of the Board of Directors that is currently comprised of Messrs. DiPiero, Clarke
and Phillips, who is Chairman.
Number of Shares
Covered by the Stock Option Plan. A total of 138,863 shares of
common stock have been reserved for future issuance pursuant to the Stock Option
Plan which is equal to 10% of shares of common stock issued in the conversion
and currently outstanding. The Stock Option Plan provides that grants
to each officer or employee and each non-employee director shall not exceed 25%
and 5% of the shares of common stock available under the Stock Option Plan,
respectively. Option grants made to non-employee directors in the
aggregate may not exceed 30% of the number of shares available under the Stock
Option Plan. In the event of a stock split, subdivision, stock
dividend or any other capital adjustment, the number of shares of common stock
under the Stock Option Plan, the number of shares to which any option grant
relates and the exercise price per share under any option shall be adjusted to
reflect such increase or decrease in the total number of shares of common stock
outstanding or such capital adjustment.
Stock
Options. Under the Stock Option Plan, the Board of Directors
or the committee appointed by the Board will determine which employees,
including officers, and non-employee directors (including advisory or emeritus
directors) will be granted options, whether such options will be incentive or
compensatory options (in the case of options granted to employees), the number
of shares subject to each option, the exercise price of each option and whether
such options may be exercised by delivering other shares of common
stock. Under the Stock Option Plan, the per share exercise price of
both an incentive and a compensatory stock option must at least equal the fair
market value of a share of common stock on the date the option is granted (110%
of fair market value in the case of incentive stock options granted to
individuals who beneficially own 10% or more of the issued and outstanding
shares of Quaint Oak Bancorp common stock).
Vesting.
Options will generally become vested and exercisable at a rate no more
rapid than 20% per year over five years, commencing one year from the date of
grant. The right to exercise will be cumulative. However,
no vesting may occur on or after a participant's employment or service with
Quaint Oak Bancorp or any of our subsidiaries is terminated for any reason other
than his death or disability. Unless the committee or Board of
Directors specifies otherwise at the time an option is granted, all options
granted to participants will become vested and exercisable in full on the date
an optionee terminates his employment or service with Quaint Oak Bancorp or a
subsidiary company because of his death or disability or as of the effective
date of a change in control.
Duration of Options.
Each stock option or portion thereof will be exercisable at any time on
or after it vests and is exercisable until the earlier of either: (1)
ten years after its date of grant or (2) six months after the date on which the
optionee's employment or service terminates, unless the committee or the Board
of Directors determines at the date of grant to extend such period of exercise
for a period of up to three years from such termination. Unless
stated otherwise at the time an option is granted, (a) if an optionee terminates
his employment or service with Quaint Oak Bancorp or a subsidiary company as a
result of disability or retirement without having fully exercised his options,
the optionee will have three years following his termination due to disability
or retirement to exercise such options, and (b) if an optionee terminates his
employment or service with Quaint Oak Bancorp following a change in control of
Quaint Oak Bancorp without having fully exercised his options, the optionee
shall have the right to exercise such options during the remainder of the
original ten year term of the option. However, failure to exercise
incentive stock options within 90 days after the date on which the optionee's
employment terminates may result in adverse tax consequences to the
optionee. If an optionee dies while serving as an employee or a
non-employee director or terminates employment or service as a result of
disability or retirement and dies without having fully exercised his options,
the optionee's executors, administrators, legatees or distributees of his estate
will have the right to exercise such options during the one year period
following his death. In no event may any option be exercisable more
than ten years from the date it was granted.
-12-
Transferability. Stock
options generally are non-transferable except by will or the laws of descent and
distribution, and during an optionee's lifetime, may be exercisable only by the
optionee or his guardian or legal representative. However, an
optionee who holds non-qualified options may transfer such options to his or her
immediate family, including the optionee's spouse, children, stepchildren,
parents, grandchildren and great grandchildren, or to a duly established trust
for the benefit of one or more of these individuals. Options so
transferred may thereafter be transferred only to the optionee who originally
received the grant or to an individual or trust to whom the optionee could have
initially transferred the option. Options which are so transferred will be
exercisable by the transferee according to the same terms and conditions as
applied to the optionee.
Paying for
Shares. Payment for shares purchased upon the exercise of
options may be made (a) in cash or by check, (b) by delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker to
sell the shares and then to properly deliver to Quaint Oak Bancorp the amount of
sale proceeds to pay the exercise price, all in accordance with applicable laws
and regulations or (c) if permitted by the committee or the Board of Directors,
by delivering shares of common stock (including shares acquired pursuant to the
previous exercise of an option) with a fair market value equal to the total
purchase price of the shares being acquired pursuant to the option. With respect
to subclause (c) in the preceding sentence, the shares of common stock delivered
to pay the purchase price must have either been (1) purchased in open market
transactions or (2) issued by Quaint Oak Bancorp pursuant to a plan thereof, in
both cases more than six months prior to the exercise date of the
option.
Term of the Stock
Option Plan. Unless sooner terminated, the Stock Option Plan
shall continue in effect for a period of ten years from February 13, 2008,
assuming approval of the Stock Option Plan by our
shareholders. Termination of the Stock Option Plan shall not affect
any previously granted options.
Federal Income Tax
Consequences. Under current provisions of the Internal Revenue
Code, the federal income tax treatment of incentive stock options and
compensatory stock options is different. Regarding incentive stock
options, an optionee who meets certain holding period requirements will not
recognize income at the time the option is granted or at the time the option is
exercised, and a federal income tax deduction generally will not be available to
Quaint Oak Bancorp at any time as a result of such grant or
exercise. An optionee, however, may be subject to the alternative
minimum tax upon exercise of an incentive stock option. With respect
to compensatory stock options, the difference between the fair market value of
the shares on the date of exercise and the option exercise price generally will
be treated as compensation income upon exercise, and Quaint Oak Bancorp will be
entitled to a deduction in the amount of income so recognized by the
optionee.
Section
162(m) of the Internal Revenue Code generally limits the deduction for certain
compensation in excess of $1.0 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executives"). Certain types
of compensation, including compensation based on performance goals, are excluded
from the $1.0 million deduction limitation. In order for compensation
to qualify for this exception: (a) it must be paid solely on account
of the attainment of one or more preestablished, objective performance goals;
(b) the performance goal must be established by a compensation committee
consisting solely of two or more outside directors, as defined; (c) the material
terms under which the compensation is to be paid, including performance goals,
must be disclosed to, and approved by, shareholders in a separate vote prior to
payment; and (d) prior to payment, the compensation committee must certify that
the performance goals and any other material terms were in fact satisfied (the
"certification requirement").
-13-
Treasury
regulations provide that compensation attributable to a compensatory stock
option is deemed to satisfy the requirement that compensation be paid solely on
account of the attainment of one or more performance goals if: (a)
the grant is made by a compensation committee consisting solely of two or more
outside directors, as defined; (b) the plan under which the option right is
granted states the maximum number of shares with respect to which options may be
granted during a specified period to any employee; (c) under the terms of the
option, the amount of compensation the employee could receive is based solely on
an increase in the value of the stock after the date of grant; and (d) the stock
option plan is disclosed to and subsequently approved by the
shareholders. The certification requirement is not necessary if these
other requirements are satisfied.
The Stock
Option Plan has been designed to meet the requirements of Section 162(m) of the
Internal Revenue Code and, as a result, we believe that compensation
attributable to stock options granted under the Stock Option Plan in accordance
with the foregoing requirements will be fully deductible under Section 162(m) of
the Internal Revenue Code. The Board of Directors believes that the
likelihood of any impact on Quaint Oak Bancorp from the deduction limitation
contained in Section 162(m) of the Internal Revenue Code is very remote at this
time.
The above
description of tax consequences under federal law is necessarily general in
nature and does not purport to be complete. Moreover, statutory
provisions are subject to change, as are their interpretations, and their
application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting
Treatment. In December 2004, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 123R (revised 2004), Share-Based
Payment, which revises SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board
Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123R requires Quaint Oak
Bancorp to recognize the cost of employee services received in share-based
payment transactions, including the Stock Option Plan, and measure the cost on
the grant-date fair value of the award. That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award.
Shareholder
Approval. No options will be granted under the Stock Option Plan unless
the Stock Option Plan is approved by shareholders. Shareholder
approval of the Stock Option Plan will also satisfy the federal tax
requirements.
Options to be
Granted. The Board of Directors of Quaint Oak Bancorp adopted the Stock
Option Plan, and the committee established thereunder intends to meet promptly
after approval by shareholders to determine the specific terms of options,
including the allocation of options to executive officers, employees and
non-employee directors of Quaint Oak Bancorp and Quaint Oak Bank. At
the present time, no specific determination has been made as to allocation of
grants. The committee is also considering awarding options to certain
non-executive officers and employees of Quaint Oak Bank.
The
Board of Directors recommends that you vote FOR adoption of the
2008
Stock Option Plan.
-14-
|
PROPOSAL
TO ADOPT THE 2008 RECOGNITION AND
RETENTION
PLAN AND TRUST AGREEMENT (Proposal
Three)
|
General
On
February 13, 2008, the Board of Directors adopted the 2008 Recognition and
Retention Plan and Trust Agreement, the objective of which is to enable Quaint
Oak Bancorp to provide officers, employees and non-employee directors of Quaint
Oak Bancorp and Quaint Oak Bank with a proprietary interest in Quaint Oak
Bancorp and as an incentive to contribute to our success. Officers,
employees and non-employee directors of Quaint Oak Bancorp and Quaint Oak Bank
who are selected by the Board of Directors of Quaint Oak Bancorp or members of a
committee appointed by the board will be eligible to receive benefits under the
Recognition and Retention Plan. If shareholder approval is obtained,
shares will be granted to officers, employees and non-employee directors as
determined by the committee or the Board of Directors.
Description
of the Recognition and Retention Plan
The
following description of the Recognition and Retention Plan is a summary of its
terms and is qualified in its entirety by reference to the Recognition and
Retention Plan, a copy of which is attached hereto as Appendix
B.
Administration. A
committee of the Board of Directors of Quaint Oak Bancorp will administer the
Recognition and Retention Plan, which currently consists of Messrs. DiPiero,
Clarke and Phillips, who is Chairman. Messrs. Augustine and Strong
and Ms. Colyer serve as the initial trustees of the Trust established pursuant
to the Recognition and Retention Plan.
Number of Shares
Covered by the Recognition and Retention Plan. Upon
shareholder approval of the Recognition and Retention Plan, Quaint Oak Bancorp
will contribute sufficient funds to the Recognition and Retention Plan Trust so
that the Trust can purchase 55,545 shares of common stock, or 4.0% of the shares
issued in the conversion and currently outstanding. It is
currently anticipated that these shares will be acquired through open market
purchases to the extent available, although Quaint Oak Bancorp reserves the
right to issue previously unissued shares or treasury shares to the Recognition
and Retention Plan. The issuance of new shares by Quaint Oak Bancorp
would be dilutive to the voting rights of existing shareholders and to Quaint
Oak Bancorp's book value per share and earnings per share.
Grants. Shares
of common stock granted pursuant to the Recognition and Retention Plan will be
in the form of restricted stock generally payable over a five-year period at a
rate no more rapid than 20% per year, beginning one year from the anniversary
date of the grant. A recipient will be entitled to all shareholder
rights with respect to shares which have been earned and distributed under the
Recognition and Retention Plan. However, until such shares have been
earned and distributed, they may not be sold, assigned, pledged or otherwise
disposed of and are required to be held in the Trust. In addition,
any cash dividends or stock dividends declared in respect of unvested share
awards will be held by the Trust for the benefit of the recipients of such plan
share awards and such dividends or returns of capital, including any interest
thereon, will be paid out proportionately by the Trust to the recipients thereof
as soon as practicable after the plan share awards are
earned.
If a
recipient terminates employment or service with Quaint Oak Bancorp for reasons
other than death, disability or change in control, the recipient will forfeit
all rights to the allocated shares under restriction. All shares
subject to an award held by a recipient whose employment or service with Quaint
Oak Bancorp or any subsidiary terminates due to death or disability shall be
deemed earned as of the recipient's last day of employment or service with
Quaint Oak Bancorp or any subsidiary and shall be distributed as soon as
practicable thereafter. In the event of a change in control of Quaint
Oak Bancorp, all shares subject to an award shall be deemed earned as of the
effective date of such change in control.
-15-
Federal Income Tax
Consequences. Pursuant to Section 83 of the Internal Revenue
Code, recipients of Recognition and Retention Plan awards will recognize
ordinary income in an amount equal to the fair market value of the shares of
common stock granted to them at the time that the shares vest. A
recipient of a Recognition and Retention Plan award may elect to accelerate the
recognition of income with respect to his or her grant to the time when shares
of common stock are first issued to him or her, notwithstanding the vesting
schedule of such awards. Quaint Oak Bancorp will be entitled to
deduct as a compensation expense for tax purposes the same amounts recognized as
income by recipients of Recognition and Retention Plan awards in the year in
which such amounts are included in income.
Section
162(m) of the Internal Revenue Code generally limits the deduction for certain
compensation in excess of $1.0 million per year paid by a publicly-traded
corporation to its covered executives. Certain types of compensation
are excluded from the $1.0 million deduction limitation. The
restricted stock awards granted under the Recognition and Retention Plan will
not be excluded from the $1.0 million limitation. However, the Board
of Directors believes that the likelihood of any impact on Quaint Oak Bancorp
from the deduction limitation contained in Section 162(m) of the Internal
Revenue Code is very remote at this time.
The above
description of tax consequences under federal law is necessarily general in
nature and does not purport to be complete. Moreover, statutory
provisions are subject to change, as are their interpretations, and their
application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting
Treatment. For a discussion of SFAS No. 123 and SFAS No
123(R), see "Proposal to Adopt the 2008 Stock Option Plan - Description of the
Stock Option Plan - Accounting Treatment." Quaint Oak Bancorp will
recognize a compensation expense as shares of common stock granted pursuant to
the Recognition and Retention Plan vest. The amount of compensation
expense recognized for accounting purposes is based upon the fair market value
of the common stock at the date of grant to recipients, rather than the fair
market value at the time of vesting for tax purposes. The vesting of
plan share awards will have the effect of increasing Quaint Oak Bancorp's
compensation expense and will be a factor in determining Quaint Oak Bancorp's
earnings per share on a fully diluted basis.
Shareholder
Approval. No awards will be granted under the Recognition and Retention
Plan unless the Recognition and Retention Plan is approved by our
shareholders.
Shares to be
Granted. The Board of Directors of Quaint Oak Bancorp adopted
the Recognition and Retention Plan and the committee established thereunder
intends to grant shares to executive officers, employees and non-employee
directors of Quaint Oak Bancorp and Quaint Oak Bank. The Recognition
and Retention Plan provides that grants to each employee and each non-employee
director shall not exceed 25% and 5%, respectively, of the shares of common
stock available under the Recognition and Retention Plan. Awards made
to non-employee directors in the aggregate may not exceed 30% of the number of
shares available. Although, the committee expects to act promptly
after receipt of shareholder approval to issue awards under the Recognition and
Retention Plan, the timing of any such grants, the individual recipients and the
specific amounts of such grants have not been determined.
The
Board of Directors recommends that you vote FOR adoption of the
2008
Recognition and Retention Plan and Trust Agreement.
-16-
|
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (Proposal
Four)
|
Our Audit
Committee has appointed Beard Miller Company LLP, independent registered public
accounting firm, to perform the audit of Quaint Oak Bancorp's financial
statements for the year ending December 31, 2008, and further directed that
their selection be submitted for ratification by the shareholders at the annual
meeting.
We have
been advised by Beard Miller Company LLP that neither that firm nor any of its
associates has any relationship with Quaint Oak Bancorp or Quaint Oak Bank other
than the usual relationship that exists between independent registered public
accounting firms and their clients. Beard Miller Company LLP will
have one or more representatives at the annual meeting who will have an
opportunity to make a statement, if they so desire, and will be available to
respond to appropriate questions.
In
determining whether to appoint Beard Miller Company LLP as our independent
registered public accounting firm, the Audit Committee considered whether the
provision of services, other than auditing services, by Beard Miller Company LLP
is compatible with maintaining their independence. In addition to
performing auditing services, Beard Miller Company LLP performed tax-related
services, including the completion of Quaint Oak Bancorp's corporate tax returns
in 2007 and Quaint Oak Bank's in 2006. The Audit Committee believes
that Beard Miller Company LLP's performance of these other services is
compatible with maintaining their independence.
The
Board of Directors recommends that you vote FOR the ratification of the
appointment
of
Beard Miller Company LLP as our independent registered public accounting
firm
for
the fiscal year ending December 31, 2008.
Audit
Fees
The
following table sets forth the aggregate fees paid by us to Beard Miller Company
LLP for professional services rendered in connection with the audit of Quaint
Oak Bancorp's consolidated financial statements for 2007 and 2006, as well as
the fees paid by us to Beard Miller Company LLP for audit-related services, tax
services and all other services rendered to us during 2007 and
2006.
|
Year Ended December
31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Audit
Fees
|
$ | 57,534 | $ | 26,249 | ||||
|
Audit-related
fees (1)
|
47,522 | -- | ||||||
|
Tax
fees (2)
|
20,159 | 5,500 | ||||||
|
All
other fees
|
-- | -- | ||||||
|
Total
|
$ | 125,215 | $ | 31,749 | ||||
|
____________________
|
|
|
(1)
|
|
Audit-related
fees in 2007 primarily consist of fees incurred in connection with the
review of the registration statement in connection with the conversion of
Quaint Oak Bank.
|
|
(2)
|
|
Tax
fees consist primarily of fees paid in connection with preparing federal
and state income tax returns and other tax related
services.
|
The Audit
Committee selects our independent registered public accounting firm and
pre-approves all audit services to be provided by it to Quaint Oak
Bancorp. The Audit Committee also reviews and pre-approves all
audit-related and non-audit related services rendered by our independent
registered public accounting firm in accordance with the Audit Committee's
charter. In its review of these services and related fees and terms,
the Audit Committee considers, among other things, the possible effect of the
performance of such services on the independence of our independent registered
public accounting firm. The Audit Committee separately approves other
individual engagements as necessary. The chair of the Audit Committee
has been delegated the authority to approve audit-related and non-audit related
services in lieu of the full Audit Committee, and presents all such
previously-approved engagements to the full Audit Committee.
-17-
Each new
engagement of Beard Miller Company LLP was approved in advance by the Audit
Committee, and none of those engagements made use of the de minimis
exception to pre-approval contained in the SEC's rules.
|
SHAREHOLDER
PROPOSALS, NOMINATIONS AND COMMUNICATIONS
WITH
THE BOARD OF DIRECTORS
|
Shareholder
Proposals. Any proposal which a shareholder wishes to have
included in the proxy materials of Quaint Oak Bancorp relating to the next
annual meeting of shareholders, which is scheduled to be held in May, 2009, must
be received at our principal executive offices located at Lakeside Office Park,
607 Lakeside Drive, Southampton, Pennsylvania 18966, Attention: Diane
J. Colyer, Corporate Secretary, no later than December 12, 2008. If
such proposal is in compliance with all of the requirements of Rule 14a-8 under
the Exchange Act, it will be included in the proxy statement and set forth on
the form of proxy issued for such annual meeting of shareholders. It
is urged that any such proposals be sent certified mail, return receipt
requested.
Shareholder proposals which are not submitted for
inclusion in our proxy materials pursuant to Rule 14a-8 under the 1934 Act may
be brought before an annual meeting pursuant to Section 2.10 of our Bylaws,
which provides that the shareholder must give timely notice thereof in writing
to the Corporate Secretary. To be timely with respect to the annual
meeting of shareholders scheduled to be held in May 2009, a shareholder's notice
must be delivered to, or mailed and received at, our principal executive offices
no later than December 12, 2008. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting the information required by Section 2.10 of our
Bylaws.
Shareholder
Nominations. Our Bylaws provide that, subject to the rights of
the holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation, all nominations for election to the
Board of Directors, other than those made by the Board or the Nominating
Committee thereof, shall be made by a shareholder who has complied with the
notice provisions in the Bylaws. Written notice of a shareholder
nomination generally must be communicated to the attention of the Corporate
Secretary and either delivered to, or mailed and received at, our principal
executive offices not later than, with respect to an annual meeting of
shareholders, 120 days prior to the anniversary date of the mailing of proxy
materials by us in connection with the immediately preceding annual meeting of
shareholders. For our annual meeting in 2009, this notice must be
received by December 12, 2008. Each written notice of a shareholder
nomination is required to set forth certain information specified in Section
3.12 of Quaint Oak Bancorp's Bylaws. We did not receive any
shareholder nominations with respect to this annual meeting.
Other Shareholder
Communications. Our Board of Directors has adopted a formal
process by which shareholders may communicate with the
Board. Shareholders who wish to communicate with our Board of
Directors may do so by sending written communications addressed to the Board of
Directors of Quaint Oak Bancorp, Inc., c/o Diane J. Colyer, Corporate Secretary,
Lakeside Office Park, 607 Lakeside Drive, Southampton, Pennsylvania
18966.
-18-
|
ANNUAL
REPORTS
|
A copy of
our Annual Report to Shareholders for the year ended December 31, 2007
accompanies this proxy statement. Such annual report is not part of
the proxy solicitation materials.
Upon
receipt of a written request, we will furnish to any shareholder without charge
a copy of our Annual Report on Form 10-K (without exhibits) for fiscal 2007
required to be filed with the Securities and Exchange Commission. In addition,
upon written request, we will furnish copies of the exhibits to the Annual
Report on Form 10-K for a fee that covers our reasonable expenses in furnishing
such exhibits. Such written requests should be directed to Diane J.
Colyer, Corporate Secretary, Quaint Oak Bancorp, Lakeside Office Park, 607
Lakeside Drive, Southampton, Pennsylvania 18966. The Form 10-K is not
part of the proxy solicitation materials.
|
OTHER
MATTERS
|
Management is not aware of any business to come before
the annual meeting other than the matters described above in this proxy
statement. However, if any other matters should properly come before
the meeting, it is intended that the proxies solicited hereby will be voted with
respect to those other matters in accordance with the
judgment of the persons voting the proxies.
The cost
of the solicitation of proxies will be borne by Quaint Oak Bancorp. We will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending the proxy materials to the
beneficial owners of our common stock. In addition to solicitations
by mail, our directors, officers and employees may solicit proxies personally or
by telephone without additional compensation. We have also engaged
Regan & Associates, Inc. a professional proxy solicitation firm, to assist
in the solicitation of proxies. Such firm will be paid a proxy
solicitation and delivery fee of $5,000 ($3,750 if the stock plans are not
approved at the special meeting), plus reimbursement of out-of-pocket
expenses.
-19-
Appendix A
QUAINT
OAK BANCORP, INC.
2008
STOCK OPTION PLAN
ARTICLE
I
ESTABLISHMENT
OF THE PLAN
Quaint
Oak Bancorp, Inc. (the “Corporation”) hereby establishes this 2008 Stock Option
Plan (the “Plan”) upon the terms and conditions hereinafter
stated.
ARTICLE
II
PURPOSE
OF THE PLAN
The
purpose of this Plan is to improve the growth and profitability of the
Corporation and its Subsidiary Companies by providing Employees and Non-Employee
Directors with a proprietary interest in the Corporation as an incentive to
contribute to the success of the Corporation and its Subsidiary Companies, and
rewarding Employees and Non-Employee Directors for outstanding
performance. All Incentive Stock Options issued under this Plan are
intended to comply with the requirements of Section 422 of the Code, and the
regulations thereunder, and all provisions hereunder shall be read, interpreted
and applied with that purpose in mind. Each recipient of an Option
hereunder is advised to consult with his or her personal tax advisor with
respect to the tax consequences under federal, state, local and other tax laws
of the receipt and/or exercise of an Option hereunder.
ARTICLE
III
DEFINITIONS
The
following words and phrases when used in this Plan with an initial capital
letter, unless the context clearly indicates otherwise, shall have the meanings
set forth below. Wherever appropriate, the masculine pronouns shall
include the feminine pronouns and the singular shall include the
plural.
3.01 “Advisory
Director” means a person appointed to serve as an advisory or emeritus director
by the Board of either the Corporation or the Bank or the successors
thereto.
3.02 “Bank”
means Quaint Oak Bank, the wholly owned subsidiary of the
Corporation.
3.03 “Beneficiary”
means the person or persons designated by an Optionee to receive any benefits
payable under the Plan in the event of such Optionee’s death. Such
person or persons shall be designated in writing on forms provided for this
purpose by the Committee and may be changed from time to time by similar written
notice to the Committee. In the absence of a written designation, the
Beneficiary shall be the Optionee’s surviving spouse, if any, or if none, his or
her estate.
3.04 “Board”
means the Board of Directors of the Corporation.
3.05 “Change
in Control” shall mean a change in the ownership of the Corporation or the Bank,
a change in the effective control of the Corporation or the Bank or a change in
the ownership of a substantial portion of the assets of the Corporation or the
Bank, in each case as provided under Section 409A of the Code and the
regulations thereunder. In no event, however, shall a Change in
Control of the Corporation be deemed to have occurred as a result of any
acquisition of securities or assets of the Corporation, the Bank or a subsidiary
of either of them, by the Corporation, the Bank, any subsidiary of either of
them, or by any employee benefit plan maintained by any of them. For
purposes of this Section 3.05, the
term “person” shall include the meaning assigned to it under Sections 13(d)(3)
or 14(d)(2) of the Exchange Act.
A-1
3.06 “Code”
means the Internal Revenue Code of 1986, as amended.
3.07 “Committee”
means a committee of two or more directors appointed by the Board pursuant to
Article IV hereof.
3.08 “Common
Stock” means shares of the common stock, $0.01 par value per share, of the
Corporation.
3.09 “Director”
means a member of the Board of Directors of the Corporation or a Subsidiary
Company or any successors thereto, including Non-Employee Directors as well as
Officers and Employees serving as Directors.
3.10 “Disability”
means in the case of any Optionee that the Optionee: (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 12 months, or (ii) is,
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 12 months, receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering
employees of the Corporation or the Bank (or would have received such benefits
for at least three months if he had been eligible to participate in such
plan).
3.11 “Effective
Date” means the date upon which the Board adopts this Plan.
3.12 “Employee”
means any person who is employed by the Corporation or a Subsidiary Company, or
is an Officer of the Corporation or a Subsidiary Company, but not including
directors who are not also Officers of or otherwise employed by the Corporation
or a Subsidiary Company.
3.13 “Employer
Group” means the Corporation and any Subsidiary Company which, with the consent
of the Board, agrees to participate in the Plan.
3.14 “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
3.15 “Exercise
Price” means the price at which a share of Common Stock may be purchased by an
Optionee pursuant to an Option.
3.16 “Fair
Market Value” shall be equal to the fair market value per share of the
Corporation’s Common Stock on the date an Option is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if the Common Stock is not readily
tradable on an established securities market, the Fair Market Value shall be
based upon a reasonable valuation method that complies with Section 409A of the
Code and the regulations issued thereunder.
3.17 “FDIC”
means the Federal Deposit Insurance Corporation.
A-2
3.18 “Incentive
Stock Option” means any Option granted under this Plan which the Board intends
(at the time it is granted) to be an incentive stock option within the meaning
of Section 422 of the Code or any successor thereto.
3.19 “Non-Employee
Director” means a member of the Board (including advisory boards, if any) of the
Corporation or any Subsidiary Company or any successor thereto, including an
Advisory Director of the Board of the Corporation and/or any Subsidiary Company,
or a former Officer or Employee of the Corporation and/or any Subsidiary Company
serving as a Director or Advisory Director, who is not an Officer or Employee of
the Corporation or any Subsidiary Company.
3.20 “Non-Qualified
Option” means any Option granted under this Plan which is not an Incentive Stock
Option.
3.21 “Officer”
means an Employee whose position in the Corporation or Subsidiary Company is
that of a corporate officer, as determined by the Board.
3.22 “Option”
means a right granted under this Plan to purchase Common
Stock.
3.23 “Optionee”
means an Employee or Non-Employee Director or former Employee or Non-Employee
Director to whom an Option is granted under the Plan.
3.24 “Retirement”
means:
(a) A
termination of employment which constitutes a “retirement” at the “normal
retirement age” or later under the Quaint Oak Bancorp, Inc. Employee Stock
Ownership Plan or such other qualified pension benefit plan maintained by the
Corporation or a Subsidiary Company as may be designated by the Board or the
Committee, or, if no such plan is applicable, which would constitute
“retirement” under the Quaint Oak Bancorp, Inc. Employee Stock Ownership Plan,
if such individual were a participant in that plan, provided, however, that the
provisions of this subsection (a) will not apply as long as an Optionee
continues to serve as a Non-Employee Director, including service as an Advisory
Director.
(b) With
respect to Non-Employee Directors, retirement means retirement from service on
the Board of Directors of the Corporation or a Subsidiary Company or any
successors thereto (including retirement from service as an Advisory Director to
the Corporation or any Subsidiary Company) after reaching normal retirement age
as established by the Company.
3.25 “Stock
Option Agreement” means the written agreement setting forth the number of shares
subject to the Option, the exercise price thereof, designating the Option as an
Incentive Stock Option or a Non-Qualified Option and such other terms of the
Option as the Committee shall deem appropriate.
3.26 “Subsidiary
Companies” means those subsidiaries of the Corporation, including the Bank,
which meet the definition of “subsidiary corporations” set forth in Section
424(f) of the Code, at the time of granting of the Option in
question.
ARTICLE
IV
ADMINISTRATION
OF THE PLAN
4.01 Duties
of the Committee. The
Plan shall be administered and interpreted by the Committee, as appointed from
time to time by the Board pursuant to Section 4.02. The Committee
shall have the authority to adopt, amend and rescind such rules, regulations and
procedures as, in its opinion, may be advisable in the administration of the
Plan, including, without limitation, rules, regulations and procedures which (i)
address matters regarding the satisfaction of an Optionee’s tax withholding
obligation pursuant to Section 12.02 hereof, (ii) to the extent permissible by
applicable law and regulation, include arrangements to facilitate the Optionee’s
ability to borrow funds for payment of the exercise or purchase price of an
Option, if applicable, from securities brokers and dealers, and (iii) subject to
any legal or regulatory restrictions or limitations, include
arrangements which provide for the payment of some or all of such exercise or
purchase price by delivery of previously owned shares of Common Stock or other
property and/or by withholding some of the shares of Common Stock which are
being acquired. The interpretation and construction by the Committee
of any provisions of the Plan, any rule, regulation or procedure adopted by it
pursuant thereto or of any Option shall be final and binding in the absence of
action by the Board.
A-3
4.02 Appointment
and Operation of the Committee. The
members of the Committee shall be appointed by, and will serve at the pleasure
of, the Board. The Board from time to time may remove members from,
or add members to, the Committee, provided the Committee shall continue to
consist of two or more members of the Board, each of whom shall be a
Non-Employee Director, as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or
any successor thereto. In addition, each member of the Committee
shall be an (i) “outside director” within the meaning of Section 162(m) of the
Code and regulations thereunder at such times as is required under such
regulations and (ii) an “independent director” as such term is defined in Rule
4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market or any successor
thereto. The Committee shall act by vote or written consent of a
majority of its members. Subject to the express provisions and
limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It
may appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its
actions and decisions to the Board at appropriate times but in no event less
than one time per calendar year.
4.03 Revocation
for Misconduct. The
Board or the Committee may by resolution immediately revoke, rescind and
terminate any Option, or portion thereof, to the extent not yet vested,
previously granted or awarded under this Plan to an Employee who is discharged
from the employ of the Corporation or a Subsidiary Company for cause, which, for
purposes hereof, shall mean termination because of the Employee’s personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order. Options granted to a
Non-Employee Director who is removed for cause pursuant to the Corporation’s
Articles of Incorporation or Bylaws or the Bank’s Articles of Incorporation and
Bylaws or the constituent documents of such other Subsidiary Company on whose
board he serves shall terminate as of the effective date of such
removal.
4.04 Limitation
on Liability. Neither
the members of the Board nor any member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or any Options granted
under it. If a member of the Board or the Committee is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of anything done or not done by him in such capacity under or with respect to
the Plan, the Corporation shall, subject to the requirements of applicable laws
and regulations, indemnify such member against all liabilities and expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and its Subsidiary Companies and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In addition, the Corporation shall
pay ongoing expenses incurred by such member if a majority of disinterested
directors concludes that such member may ultimately be entitled to
indemnification, provided, however, that before making advance payment of
expenses, the Corporation shall obtain an agreement that the Corporation will be
repaid if such member is later determined not to be entitled to such
indemnification.
A-4
4.05 Compliance
with Law and Regulations. All
Options granted hereunder shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. The Corporation shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of or obtaining of
consents or approvals with respect to such shares under any federal or state law
or any rule or regulation of any government body, which the Corporation shall,
in its sole discretion, determine to be necessary or
advisable. Moreover, no Option may be exercised if such exercise
would be contrary to applicable laws and regulations.
4.06 Restrictions
on Transfer. The
Corporation may place a legend upon any certificate representing shares acquired
pursuant to an Option granted hereunder noting that the transfer of such shares
may be restricted by applicable laws and regulations.
4.07 No
Deferral of Compensation Under Section 409A of the Code. All
Options granted under the Plan are designed to not constitute a deferral of
compensation for purposes of Section 409A of the
Code. Notwithstanding any other provision in this Plan to the
contrary, all of the terms and conditions of any Options granted under this Plan
shall be designed to satisfy the exemption for stock options set forth in the
regulations issued under Section 409A of the Code. Both this Plan and
the terms of all Options granted hereunder shall be interpreted in a manner that
requires compliance with all of the requirements of the exemption for stock
options set forth in the regulations issued under Section 409A of the
Code. No Optionee shall be permitted to defer the recognition of
income beyond the exercise date of a Non-Qualified Option or beyond the date
that the Common Stock received upon the exercise of an Incentive Stock Option is
sold.
ARTICLE
V
ELIGIBILITY
Options
may be granted to such Employees or Non-Employee Directors of the Corporation
and its Subsidiary Companies as may be designated from time to time by the Board
or the Committee. Options may not be granted to individuals who are
not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to
receive only Non-Qualified Options.
ARTICLE
VI
COMMON
STOCK COVERED BY THE PLAN
6.01 Option
Shares. The
aggregate number of shares of Common Stock which may be issued pursuant to this
Plan, subject to adjustment as provided in Article IX, shall be
138,863. None of such shares shall be the subject of more than one
Option at any time, but if an Option as to any shares is surrendered before
exercise, or expires or terminates for any reason without having been exercised
in full, or for any other reason ceases to be exercisable, the number of shares
covered thereby shall again become available for grant under the Plan as if no
Options had been previously granted with respect to such
shares. During the time this Plan remains in effect, the aggregate
grants of Options to each Employee and each Non-Employee Director shall not
exceed 25% and 5% of the shares of Common Stock initially available under the
Plan, respectively, and Options granted to Non-Employee Directors in the
aggregate may not exceed 30% of the number of shares initially available under
this Plan, in each case subject to adjustment as provided in Article
IX.
A-5
6.02 Source
of Shares. The
shares of Common Stock issued under the Plan may be authorized but unissued
shares, treasury shares or shares purchased by the Corporation on the open
market or from private sources for use under the Plan.
ARTICLE
VII
DETERMINATION
OF
OPTIONS,
NUMBER OF SHARES, ETC.
The Board
or the Committee shall, in its discretion, determine from time to time which
Employees or Non-Employee Directors will be granted Options under the Plan, the
number of shares of Common Stock subject to each Option, and whether each Option
will be an Incentive Stock Option or a Non-Qualified Stock Option. In
making all such determinations there shall be taken into account the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his or her present and potential contributions to the growth and
success of the Corporation, his or her salary or other compensation and such
other factors as the Board or the Committee shall deem relevant to accomplishing
the purposes of the Plan. The Board or the Committee may but shall
not be required to request the written recommendation of the Chief Executive
Officer of the Corporation other than with respect to Options to be granted to
him.
ARTICLE
VIII
OPTIONS
Each
Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock
Option Agreement. The
proper Officers on behalf of the Corporation and each Optionee shall execute a
Stock Option Agreement which shall set forth the total number of shares of
Common Stock to which it pertains, the exercise price, whether it is a
Non-Qualified Option or an Incentive Stock Option, and such other terms,
conditions, restrictions and privileges as the Board or the Committee in each
instance shall deem appropriate, provided they are not inconsistent with the
terms, conditions and provisions of this Plan. Each Optionee shall
receive a copy of his executed Stock Option Agreement.
8.02 Option
Exercise Price.
(a) Incentive
Stock Options. The
per share price at which the subject Common Stock may be purchased upon exercise
of an Incentive Stock Option shall be no less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock at the time such Incentive
Stock Option is granted, except as provided in Section 8.09(b), and subject to
any applicable adjustment pursuant to Article IX hereof.
(b) Non-Qualified
Options. The
per share price at which the subject Common Stock may be purchased upon exercise
of a Non-Qualified Option shall be no less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock at the time such Non-Qualified
Option is granted, subject to any applicable adjustment pursuant to Article IX
hereof.
A-6
8.03 Vesting and
Exercise of Options.
(a) General
Rules. Incentive
Stock Options and Non-Qualified Options shall become vested and exercisable at a
rate no more rapid than 20% per year, commencing one year from the date of grant
as shall be determined by the Committee, and the right to exercise shall be
cumulative. Notwithstanding the foregoing, except as provided in
Section 8.03(b) hereof, no vesting shall occur on or after an Employee’s
employment and/or service as a Non-Employee Director (which, for purposes
hereof, shall include service as an Advisory Director) with the Corporation or
any of the Subsidiary Companies is terminated. In determining the
number of shares of Common Stock with respect to which Options are vested and/or
exercisable, fractional shares will be rounded down to the nearest whole number,
provided that such fractional shares shall be aggregated and deemed vested on
the final date of vesting.
(b) Accelerated
Vesting. Unless
the Board or the Committee shall specifically state otherwise at the time an
Option is granted, all Options granted under this Plan shall become vested and
exercisable in full on the date an Optionee terminates his employment with the
Corporation or a Subsidiary Company or service as a Non-Employee Director
(including for purposes hereof service as an Advisory Director) because of his
death or Disability (provided, however, no such accelerated vesting shall occur
if a Recipient remains employed by or continues to serve as a Director
(including for purposes hereof service as an Advisory Director) of at least one
member of the Employer Group). Furthermore, notwithstanding the general rule
contained in Section 8.03(a), all Options granted under this Plan shall become
vested and exercisable in full as of the effective date of a Change in
Control.
8.04 Duration of
Options.
(a) General
Rule. Except
as provided in Sections 8.04(b) and 8.09, each Option or portion thereof granted
to Employees and Non-Employee Directors shall be exercisable at any time on or
after it vests and becomes exercisable until the earlier of (i) ten (10) years
after its date of grant or (ii) six (6) months after the date on which the
Optionee ceases to be employed (or in the service of the Board of Directors) by
the Corporation and all Subsidiary Companies, unless the Board of Directors or
the Committee in its discretion decides at the time of grant to extend such
period of exercise to a period not exceeding three (3) years. In the
event an Incentive Stock Option is not exercised within 90 days of the effective
date of termination of Optionee’s status as an Employee, the tax treatment
accorded Incentive Stock Options by the Code may not be available. In
addition, the accelerated vesting of Incentive Stock Options provided by Section
8.03(b) may result in all or a portion of such Incentive Stock Options no longer
qualifying as Incentive Stock Options.
(b) Exception
for Termination Due to Disability, Retirement, Change in Control or
Death. Unless
the Board or the Committee shall specifically state otherwise at the time an
Option is granted: (i) if an Employee terminates his employment with the
Corporation or a Subsidiary Company as a result of Disability or Retirement
without having fully exercised his Options, the Employee shall have the right,
during the three (3) year period following his termination due to Disability or
Retirement, to exercise such Options, and (ii) if a Non-Employee Director
terminates his service as a director (including service as an Advisory Director)
with the Corporation or a Subsidiary Company as a result of Disability or
Retirement without having fully exercised his Options, the Non-Employee Director
shall have the right, during the three (3) year period following his termination
due to Disability or Retirement, to exercise such Options.
A-7
Subject to the provisions
of Article IX hereof, unless the Board or the Committee shall specifically state
otherwise at the time an Option is granted, if an Employee or Non-Employee
Director terminates his employment or service with the Corporation or a
Subsidiary Company following a Change in Control of the Corporation without
having fully exercised his Options, the Optionee shall have the right to
exercise such Options during the remainder of the original ten (10) year term of
the Option from the date of grant.
If an Optionee dies while
in the employ or service of the Corporation or a Subsidiary Company or
terminates employment or service with the Corporation or a Subsidiary Company as
a result of Disability or Retirement and dies without having fully exercised his
Options, the executors, administrators, legatees or distributees of his estate
shall have the right, during the one (1) year period following his death, to
exercise such Options.
In no event, however,
shall any Option be exercisable beyond the earlier of (i) ten (10) years from
the date it was granted, or (ii) with respect to incentive stock options subject
to Section 8.09(b), the original expiration date of the
Option.
8.05 Nonassignability. Options
shall not be transferable by an Optionee except by will or the laws of descent
or distribution, and during an Optionee’s lifetime shall be exercisable only by
such Optionee or the Optionee’s guardian or legal
representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his immediate family or to a duly established trust for the benefit
of one or more of these individuals. For purposes hereof,
“immediate family” includes but is not necessarily limited to, the Participant’s
spouse, children (including step children), parents, grandchildren and great
grandchildren. Options so transferred may thereafter be transferred
only to the Optionee who originally received the grant or to an individual or
trust to whom the Optionee could have initially transferred the Option pursuant
to this Section 8.05. Options which are transferred pursuant to this
Section 8.05 shall be exercisable by the transferee according to the same terms
and conditions as applied to the Optionee.
8.06 Manner
of Exercise. Options
may be exercised in part or in whole and at one time or from time to
time. The procedures for exercise shall be set forth in the written
Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment
for Shares. Payment
in full of the purchase price for shares of Common Stock purchased pursuant to
the exercise of any Option shall be made to the Corporation upon exercise of the
Option. All shares sold under the Plan shall be fully paid and
nonassessable. Payment for shares may be made by the Optionee (i) in
cash or by check, (ii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to the Corporation the amount of sale proceeds to pay the
exercise price, all in accordance with applicable laws and regulations, or (iii)
at the discretion of the Board or the Committee, by delivering shares of Common
Stock (including shares acquired pursuant to the previous exercise of an Option)
equal in fair market value to the purchase price of the shares to be acquired
pursuant to the Option, by withholding some of the shares of Common Stock which
are being purchased upon exercise of an Option, or any combination of the
foregoing. With respect to subclause (iii) hereof, the shares of
Common Stock delivered to pay the purchase price must have either been (x)
purchased in open market transactions or (y) issued by the Corporation pursuant
to a plan thereof more than six months prior to the exercise date of the
Option.
8.08 Voting
and Dividend Rights. No
Optionee shall have any voting or dividend rights or other rights of a
shareholder in respect of any shares of Common Stock covered by an Option prior
to the time that his name is recorded on the Corporation’s shareholder ledger as
the holder of record of such shares acquired pursuant to an exercise of an
Option.
8.09 Additional
Terms Applicable to Incentive Stock Options. All
Options issued under the Plan which are designated as Incentive Stock Options
will be subject, in addition to the terms detailed in Sections 8.01 to 8.08
above, to those contained in this Section 8.09.
A-8
(a) Amount
Limitation. Notwithstanding
any contrary provisions contained elsewhere in this Plan and as long as required
by Section 422 of the Code, the aggregate Fair Market Value, determined as of
the time an Incentive Stock Option is granted, of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by the
Optionee during any calendar year, under this Plan and stock options that
satisfy the requirements of Section 422 of the Code under any other stock option
plans maintained by the Corporation (or any parent or Subsidiary Company), shall
not exceed $100,000.
(b) Limitation
on Ten Percent Shareholders. The
price at which shares of Common Stock may be purchased upon exercise of an
Incentive Stock Option granted to an individual who, at the time such Incentive
Stock Option is granted, owns, directly or indirectly, more than ten percent
(10%) of the total combined voting power of all classes of stock issued to
shareholders of the Corporation or any Subsidiary Company, shall be no less than
one hundred and ten percent (110%) of the Fair Market Value of a share of the
Common Stock of the Corporation at the time of grant, and such Incentive Stock
Option shall by its terms not be exercisable after the earlier of the date
determined under Section 8.03 or the expiration of five (5) years from the date
such Incentive Stock Option is granted.
(c) Notice
of Disposition; Withholding; Escrow. An
Optionee shall immediately notify the Corporation in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of any
shares of Common Stock acquired through exercise of an Incentive Stock Option,
within two (2) years after the grant of such Incentive Stock Option or within
one (1) year after the acquisition of such shares, setting forth the date and
manner of disposition, the number of shares disposed of and the price at which
such shares were disposed of. The Corporation shall be entitled to
withhold from any compensation or other payments then or thereafter due to the
Optionee such amounts as may be necessary to satisfy any minimum withholding
requirements of Federal or state law or regulation and, further, to collect from
the Optionee any additional amounts which may be required for such
purpose. The Committee may, in its discretion, require shares of
Common Stock acquired by an Optionee upon exercise of an Incentive Stock Option
to be held in an escrow arrangement for the purpose of enabling compliance with
the provisions of this Section 8.09(c).
ARTICLE
IX
ADJUSTMENTS
FOR CAPITAL CHANGES
9.01 General
Adjustments. The
aggregate number of shares of Common Stock available for issuance under this
Plan, the number of shares to which any Option relates, the maximum number of
shares that can be covered by Options to each Employee, each Non-Employee
Director and Non-Employee Directors as a group and the exercise price per share
of Common Stock under any Option shall be proportionately adjusted for any
increase or decrease in the total number of outstanding shares of Common Stock
issued subsequent to the effective date of this Plan resulting from a split,
subdivision or consolidation of shares or any other capital adjustment, the
payment of a stock dividend, or other increase or decrease in such shares
effected without receipt or payment of consideration by the
Corporation.
9.02 Adjustments
for Mergers and Other Corporate Transactions. If,
upon a merger, consolidation, reorganization, liquidation, recapitalization or
the like of the Corporation, the shares of the Corporation’s Common Stock shall
be exchanged for other securities of the Corporation or of another corporation,
each Option shall be converted, subject to the conditions herein stated, into
the right to purchase or acquire such number of shares of Common Stock or amount
of other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such Optionee would have been entitled to purchase or acquire except for such
action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options, provided that in each case the number of shares or
other securities subject to the substituted or assumed stock option and the
exercise price thereof shall be determined in a manner that satisfies the
requirements of Treasury Regulation §1.424-1 and the regulations issued under
Section 409A of the Code so that the substituted or assumed option is not deemed
to be a modification of the outstanding Options. Notwithstanding any
provision to the contrary herein, the term of any Option granted hereunder and
the property which the Optionee shall receive upon the exercise or termination
thereof shall be subject to and be governed by the provisions regarding the
treatment of any such Options set forth in a definitive agreement with respect
to any of the aforementioned transactions entered into by the Corporation to the
extent any such Option remains outstanding and unexercised upon consummation of
the transactions contemplated by such definitive agreement.
A-9
ARTICLE
X
AMENDMENT
AND TERMINATION OF THE PLAN
The Board
may, by resolution, at any time terminate or amend the Plan with respect to any
shares of Common Stock as to which Options have not been granted, subject to
regulations of the FDIC and any required shareholder approval or any shareholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the
holder of an Option, alter or impair any Option previously granted or awarded
under this Plan except as provided by Article IX hereof or except as
specifically authorized herein.
Notwithstanding anything to the contrary herein, in no
event shall the Board of Directors without shareholder approval amend the Plan
or shall the Board of Directors or the Committee amend an Option in any manner
that effectively allows the repricing of any Option previously granted under the
Plan either through a reduction in the Exercise Price or through the
cancellation and regrant of a new Option in exchange for the cancelled Option
(except as permitted pursuant to Article IX in connection with a change in the
Corporation’s capitalization).
ARTICLE
XI
EMPLOYMENT
RIGHTS
Neither
the Plan nor the grant of any Options hereunder nor any action taken by the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee or Non-Employee Director of the Corporation or a Subsidiary
Company to continue in such capacity.
ARTICLE
XII
WITHHOLDING
12.01 Tax
Withholding. The
Corporation may withhold from any cash payment made under this Plan sufficient
amounts to cover any applicable minimum withholding and employment taxes, and if
the amount of such cash payment is insufficient, the Corporation may require the
Optionee to pay to the Corporation the amount required to be withheld as a
condition to delivering the shares acquired pursuant to an
Option. The Corporation also may withhold or collect amounts with
respect to a disqualifying disposition of shares of Common Stock acquired
pursuant to exercise of an Incentive Stock Option, as provided in Section
8.09(c).
12.02 Methods
of Tax Withholding. The
Board or the Committee is authorized to adopt rules, regulations or procedures
which provide for the satisfaction of an Optionee’s tax withholding obligation
by the retention of shares of Common Stock to which the Employee would otherwise
be entitled pursuant to an Option and/or by the Optionee’s delivery of
previously owned shares of Common Stock or other property.
A-10
ARTICLE
XIII
EFFECTIVE
DATE OF THE PLAN; TERM
13.01 Effective
Date of the Plan. This
Plan shall become effective on the Effective Date, and Options may be granted
hereunder no earlier than the date this Plan is approved by shareholders and no
later than the termination of the Plan, provided this Plan is approved by
shareholders of the Corporation pursuant to Article XIV
hereof.
13.02 Term
of Plan. Unless
sooner terminated, this Plan shall remain in effect for a period of ten (10)
years ending on the tenth anniversary of the Effective
Date. Termination of the Plan shall not affect any Options previously
granted and such Options shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms or the terms hereof
expire or are forfeited.
ARTICLE
XIV
SHAREHOLDER
APPROVAL
The
Corporation shall submit this Plan to shareholders for approval at a meeting of
shareholders of the Corporation held within twelve (12) months following the
Effective Date in order to meet the requirements of (i) Section 422 of the Code
and regulations thereunder and (ii) Section 162(m) of the Code and regulations
thereunder. In addition to any other shareholder approvals that may
be deemed necessary or appropriate by the Corporation, this Plan is subject to
approval by a majority of the total votes eligible to be cast by shareholders of
the Company.
ARTICLE
XV
MISCELLANEOUS
15.01
Governing
Law. To
the extent not governed by federal law, this Plan shall be construed under the
laws of the Commonwealth of Pennsylvania.
A-11
Appendix B
QUAINT
OAK BANCORP, INC.
2008
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE
I
ESTABLISHMENT
OF THE PLAN AND TRUST
1.01 Quaint
Oak Bancorp, Inc. (the “Corporation”) hereby establishes the 2008 Recognition
and Retention Plan (the “Plan”) and Trust (the “Trust”) upon the terms and
conditions hereinafter stated in this 2008 Recognition and Retention Plan and
Trust Agreement (the “Agreement”).
1.02 The
Trustee hereby accepts this Trust and agrees to hold the Trust assets existing
on the date of this Agreement and all additions and accretions thereto upon the
terms and conditions hereinafter stated.
ARTICLE
II
PURPOSE
OF THE PLAN
The
purpose of the Plan is to retain personnel of experience and ability in key
positions by providing Employees and Non-Employee Directors with a proprietary
interest in the Corporation and its Subsidiary Companies as compensation for
their contributions to the Corporation and the Subsidiary Companies and as an
incentive to make such contributions in the future. Each
Recipient of a Plan Share Award hereunder is advised to consult with his or her
personal tax advisor with respect to the tax consequences under federal, state,
local and other tax laws of the receipt of a Plan Share Award
hereunder.
ARTICLE
III
DEFINITIONS
The
following words and phrases when used in this Agreement with an initial capital
letter, unless the context clearly indicates otherwise, shall have the meanings
set forth below. Wherever appropriate, the masculine pronouns shall
include the feminine pronouns and the singular shall include the
plural.
3.01 “Advisory
Director” means a person appointed to serve as an advisory or emeritus director
by the Board of either the Corporation or the Bank or the successors
thereto.
3.02 “Bank”
means Quaint Oak Bank, the wholly owned subsidiary of the
Corporation.
3.03 “Beneficiary”
means the person or persons designated by a Recipient to receive any benefits
payable under the Plan in the event of such Recipient’s death. Such
person or persons shall be designated in writing on forms provided for this
purpose by the Committee and may be changed from time to time by similar written
notice to the Committee. In the absence of a written designation, the
Beneficiary shall be the Recipient’s surviving spouse, if any, or if none, his
or her estate.
3.04 “Board”
means the Board of Directors of the Corporation.
3.05 “Change
in Control” shall mean a change in the ownership of the Corporation or the Bank,
a change in the effective control of the Corporation or the Bank or a change in
the ownership of a substantial portion of the assets of the Corporation or the
Bank, in each case as provided under Section 409A of the Code and the
regulations thereunder. In no event, however, shall a Change in
Control of the Corporation
be deemed to have occurred as a result of any acquisition of securities or
assets of the Corporation, the Bank or a subsidiary of either of them, by the
Corporation, the Bank, any subsidiary of either of them, or by any employee
benefit plan maintained by any of them. For purposes of this Section
3.05, the term “person” shall include the meaning assigned to it under Sections
13(d)(3) or 14(d)(2) of the Exchange Act.
B-1
3.06 “Code”
means the Internal Revenue Code of 1986, as amended.
3.07 “Committee”
means the committee appointed by the Board pursuant to Article IV
hereof.
3.08 “Common
Stock” means shares of the common stock, $0.01 par value per share, of the
Corporation.
3.09 “Director”
means a member of the Board of Directors of the Corporation or a Subsidiary
Company or any successors thereto, including Non-Employee Directors as well as
Officers and Employees serving as Directors.
3.10 “Disability”
means in the case of any Recipient that the Recipient: (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 12 months, or (ii) is,
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 12 months, receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering
employees of the Corporation or the Bank (or would have received such benefits
for at least three months if he had been eligible to participate in such
plan).
3.11 “Effective
Date” means the day upon which the Board adopts this Plan.
3.12 “Employee”
means any person who is employed by the Corporation or a Subsidiary Company or
is an Officer of the Corporation or a Subsidiary Company, but not including
directors who are not also Officers of or otherwise employed by the Corporation
or a Subsidiary Company.
3.13 “Employer
Group” means the Corporation and any Subsidiary Company which, with the consent
of the Board, agrees to participate in the Plan.
3.14 “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
3.15 “Non-Employee
Director” means a member of the Board (including advisory boards, if any) of the
Corporation or any Subsidiary Company or any successor thereto, including an
Advisory Director of the Board of the Corporation and/or any Subsidiary Company
or a former Officer or Employee of the Corporation and/or any Subsidiary Company
serving as a Director or Advisory Director who is not an Officer or Employee of
the Corporation or any Subsidiary Company.
3.16 “Officer”
means an Employee whose position in the Corporation or a Subsidiary Company is
that of a corporate officer, as determined by the Board.
3.17 “Performance
Share Award” means a Plan Share Award granted to a Recipient pursuant to Section
7.05 of the Plan.
3.18 “Performance
Goal” means an objective for the Corporation or any Subsidiary Company or any
unit thereof or any Employee of the foregoing that may be established by the
Committee for a Performance Share Award to become vested, earned or
exercisable. The establishment of Performance Goals are intended to
make the applicable Performance Share Awards “performance-based” compensation
within the meaning of Section 162(m) of the Code, and the Performance Goals
shall be based on one or more of the following criteria:
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|
(i)
|
|
net
income, as adjusted for non-recurring items;
|
|
(ii)
|
|
cash
earnings;
|
|
(iii)
|
|
earnings
per share;
|
|
(iv)
|
|
cash
earnings per share;
|
|
(v)
|
|
return
on average equity;
|
|
(vi)
|
|
return
on average assets;
|
|
(vii)
|
|
assets;
|
|
(viii)
|
|
stock
price;
|
|
(ix)
|
|
total
shareholder return;
|
|
(x)
|
|
capital;
|
|
(xi)
|
|
net
interest income;
|
|
(xii)
|
|
market
share;
|
|
(xiii)
|
|
cost
control or efficiency ratio; and
|
|
(xiv)
|
|
asset
growth.
|
3.19 “Plan
Shares” or “Shares” means shares of Common Stock which may be distributed to a
Recipient pursuant to the Plan.
3.20 “Plan
Share Award” or “Award” means a right granted under this Plan to receive a
distribution of Plan Shares upon completion of the service requirements
described in Article VII hereof, and includes Performance Share
Awards.
3.21 “Recipient”
means an Employee or Non-Employee Director or former Employee or Non-Employee
Director who receives a Plan Share Award or Performance Share Award under the
Plan.
3.22 “Subsidiary
Companies” means those subsidiaries of the Corporation, including the Bank,
which meet the definition of “subsidiary corporations” set forth in Section
424(f) of the Code, at the time of the granting of the Plan Share Award in
question.
3.23 “Trustee”
means such firm, entity or persons approved by the Board to hold legal title to
the Plan and the Plan assets for the purposes set forth
herein.
ARTICLE
IV
ADMINISTRATION
OF THE PLAN
4.01 Duties
of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. In addition, each member of the
Committee shall be an (i) “outside director” within the meaning of Section
162(m) of the Code and the regulations thereunder at such times as is required
under such regulations and (ii) an “independent director” as such term is
defined in Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market
or any successor thereto. The Committee shall have all of the powers
allocated to it in this and other sections of the Plan. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding in the
absence of action by the Board. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with
respect to the Plan to the Board at appropriate times, but in no event less than
once per calendar year.
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4.02 Role
of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the
Board. The Board may in its discretion from time to time remove
members from, or add members to, the Committee, and may remove or replace the
Trustee, provided that any directors who are selected as members of the
Committee shall be Non-Employee Directors.
4.03 Revocation
for Misconduct. Notwithstanding anything to the contrary
herein, the Board or the Committee may by resolution immediately revoke, rescind
and terminate any Plan Share Award, or portion thereof, to the extent not yet
vested, previously granted or awarded under this Plan to an Employee who is
discharged from the employ of the Corporation or a Subsidiary Company for cause,
which, for purposes hereof, shall mean termination because of the Employee’s
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order. Unvested Plan
Share Awards to a Non-Employee Director who is removed for cause pursuant to the
Corporation’s Articles of Incorporation or Bylaws or the Bank’s Articles of
Incorporation or Bylaws or the constituent documents of such other Subsidiary
Company on whose board he or she serves shall terminate as of the effective date
of such removal.
4.04 Limitation
on Liability. No member of the Board or the Committee shall be
liable for any determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member of the
Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he or she acted in
good faith and in a manner he reasonably believed to be in the best interests
of the Corporation and any Subsidiary Companies and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In addition, the Corporation shall pay ongoing expenses
incurred by such member if a majority of disinterested directors concludes that
such member may ultimately be entitled to indemnification, provided, however,
that before making advance payment of expenses, the Corporation shall obtain an
agreement that the Corporation will be repaid if such member is later determined
not to be entitled to such indemnification.
4.05 Compliance
with Laws and Regulations. All Awards granted hereunder shall
be subject to all applicable federal and state laws, rules and regulations and
to such approvals by any government or regulatory agency or shareholders as may
be required. The Corporation shall not be required to issue or
deliver any certificates for shares of Common Stock prior to the completion of
any registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable.
4.06 Restrictions
on Transfer. The Corporation may place a legend upon any
certificate representing shares issued pursuant to a Plan Share Award noting
that such shares may be restricted by applicable laws and
regulations.
B-4
4.07 No
Deferral of Compensation Under Section 409A of the Code. All
awards granted under the Plan are designed to not constitute a deferral of
compensation for purposes of Section 409A of the
Code. Notwithstanding any other provision in this Plan to the
contrary, all of the terms and conditions of any Awards granted under this Plan
shall be designed to satisfy the exemption for restricted stock awards set forth
in the regulations issued under Section 409A of the Code. Both this
Plan and the terms of all Awards granted hereunder shall be interpreted in a
manner that requires compliance with all of the requirements of the exemption
for restricted stock awards set forth in the regulations issued under Section
409A of the Code. No Recipient shall be permitted to defer the
recognition of income beyond the vesting date of an Award.
ARTICLE
V
CONTRIBUTIONS
5.01 Amount
and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiary Companies to the Trust established under
this Plan. Such amounts may be paid in cash or in shares of Common
Stock and shall be paid to the Trust at the designated time of
contribution. No contributions by Employees or Non-Employee Directors
shall be permitted.
5.02 Investment
of Trust Assets; Number of Plan Shares. Subject to Section
8.02 hereof, the Trustee shall invest all of the Trust’s assets primarily in
Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 55,545 shares of Common Stock,
subject to adjustment as provided in Section 9.01 hereof, which shares shall be
purchased (from the Corporation and/or, if permitted by applicable regulations,
from shareholders thereof) by the Trust with funds contributed by the
Corporation. During the time this Plan remains in effect, Awards to
each Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock initially available under the Plan, respectively, and
Plan Share Awards to Non-Employee Directors in the aggregate shall not exceed
30% of the number of shares initially available under this Plan, in each case
subject to adjustment as provided in Section 9.01 hereof.
ARTICLE
VI
ELIGIBILITY;
ALLOCATIONS
6.01 Awards. Plan
Share Awards and Performance Share Awards may be made to such Employees and
Non-Employee Directors as may be selected by the Board or the
Committee. In selecting those Employees to whom Plan Share Awards
and/or Performance Share Awards may be granted and the number of Shares covered
by such Awards, the Board or the Committee shall consider the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his or her present and potential contributions to the growth and
success of the Corporation, his or her salary or other compensation and such
other factors as deemed relevant to accomplishing the purposes of the
Plan. The Board or the Committee may but shall not be required to
request the written recommendation of the Chief Executive Officer of the
Corporation other than with respect to Plan Share Awards and/or Performance
Share Awards to be granted to him.
6.02 Form
of Allocation. As promptly as practicable after an allocation
pursuant to Section 6.01 that a Plan Share Award or a Performance Share Award is
to be issued, the Board or the Committee shall notify the Recipient in writing
of the grant of the Award, the number of Plan Shares covered by the Award, and
the terms upon which the Plan Shares subject to the Award shall be distributed
to the Recipient. The Board or the Committee shall maintain records
as to all grants of Plan Share Awards or Performance Share Awards under the
Plan.
B-5
6.03 Allocations
Not Required to any Specific Employee or Non-Employee
Director. No Employee or Non-Employee Director shall have any
right or entitlement to receive a Plan Share Award hereunder, such Awards being
at the total discretion of the Board or the Committee.
ARTICLE
VII
EARNING
AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning
Plan Shares; Forfeitures.
(a) General
Rules. Subject to the terms hereof, Plan Share Awards shall be
earned by a Recipient at a rate no more rapid than twenty percent (20%) of the
aggregate number of Shares covered by the Award as of each annual anniversary of
the date of grant of the Award, with such vesting rate to be determined by the
Committee. If the employment of an Employee or service as a
Non-Employee Director (including for purposes hereof service as an Advisory
Director) is terminated before the Plan Share Award has been completely earned
for any reason (except as specifically provided in subsection (b) below), the
Recipient shall forfeit the right to any Shares subject to the Award which have
not theretofore been earned. In the event of a forfeiture of the
right to any Shares subject to an Award, such forfeited Shares shall become
available for allocation pursuant to Section 6.01 hereof as if no Award had been
previously granted with respect to such Shares. No fractional shares
shall be distributed pursuant to this Plan. In determining the number of Shares
which are earned as of any annual anniversary date, fractional shares shall be
rounded down to the nearest whole number, provided that such fractional Shares
shall be aggregated and distributed on the final date of
vesting.
(b) Exception
for Termination Due to Death, Disability or Change in
Control. Notwithstanding the general rule contained in Section
7.01(a), all Plan Shares subject to a Plan Share Award held by a Recipient whose
employment with the Corporation or any Subsidiary Company or service as a
Non-Employee Director (including for purposes hereof service as an Advisory
Director) terminates due to death or Disability shall be deemed earned as of the
Recipient’s last day of employment with or service to the Corporation or any
Subsidiary Company (provided, however, no such accelerated vesting shall occur
if a Recipient remains employed by or continues to serve as a Director
(including for purposes hereof service as an Advisory Director) of at least one
member of the Employer Group) and shall be distributed as soon as practicable
thereafter. Furthermore, notwithstanding the general rule contained
in Section 7.01(a), all Plan Shares subject to a Plan Share Award held by a
Recipient shall be deemed earned as of the effective date of a Change in
Control.
7.02 Distribution
of Dividends. Any cash dividends, stock dividends or returns
of capital declared in respect of each unvested Plan Share Award will be held by
the Trust for the benefit of the Recipient on whose behalf such Plan Share Award
is then held by the Trust, and such dividends or returns of capital, including
any interest thereon, will be paid out proportionately by the Trust to the
Recipient thereof as soon as practicable after the Plan Share Award becomes
earned.
7.03 Distribution
of Plan Shares.
(a) Timing
of Distributions: General Rule. Subject to the
provisions of Section 7.05 hereof, Plan Shares shall be distributed to the
Recipient or his or her Beneficiary, as the case may be, as soon as practicable
after they have been earned.
(b) Form
of Distributions. All Plan Shares, together with any Shares
representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall
be made in cash.
B-6
(c) Withholding. The
Trustee may withhold from any cash payment or Common Stock distribution made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of a cash payment is insufficient, the
Trustee may require the Recipient or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan
Shares. The Trustee shall pay over to the Corporation or any
Subsidiary Company which employs or employed such Recipient any such amount
withheld from or paid by the Recipient or Beneficiary.
(d) Restrictions
on Selling of Plan Shares. Plan Share Awards may not be sold,
assigned, pledged or otherwise disposed of prior to the time that they are
earned and distributed pursuant to the terms of this Plan. Upon
distribution, the Board or the Committee may require the Recipient or his or her
Beneficiary, as the case may be, to agree not to sell or otherwise dispose of
his distributed Plan Shares except in accordance with all then applicable
federal and state securities laws, and the Board or the Committee may cause a
legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict the transfer of the distributed Plan Shares for
such period of time or under such circumstances as the Board or the Committee,
upon the advice of counsel, may deem appropriate.
7.04 Voting
of Plan Shares. All shares of Common Stock held by the Trust
shall be voted by the Trustee in its discretion. Recipients of Plan
Share Awards shall have no voting rights until the Common Stock is earned and
distributed pursuant to the terms of the Plan Share Award.
7.05 Performance
Share Awards.
(a) Designation
of Performance Share Awards. The Committee may determine to
make any Plan Share Award a Performance Share Award by making such Plan Share
Award contingent upon the achievement of a Performance Goal or any combination
of Performance Goals. Each Performance Share Award shall be evidenced
by a written agreement (“Performance Award Agreement”), which shall set forth
the Performance Goals applicable to the Performance Share Award, the maximum
amounts payable and such other terms and conditions as are applicable to the
Performance Share Award. Each Performance Share Award shall be
granted and administered to comply with the requirements of Section 162(m) of
the Code or any successor thereto.
(b) Timing
of Grants. Any Performance Share Award shall be made not later
than 90 days after the start of the period for which the Performance Share Award
relates and shall be made prior to the completion of 25% of such
period. All determinations regarding the achievement of any
Performance Goals will be made by the Committee. The Committee may
not increase during a year the amount of a Performance Share Award that would
otherwise be payable upon achievement of the Performance Goals but may reduce or
eliminate the payments as provided for in the Performance Award
Agreement.
(c) Restrictions
on Grants. Nothing contained in this Plan will be deemed in
any way to limit or restrict the Committee from making any Award or payment to
any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.
(d) Rights
of Recipients. A Participant who receives a Performance Share
Award payable in Common Stock shall have no rights as a shareholder until the
Common Stock is issued pursuant to the terms of the Performance Award
Agreement.
(e) Distribution. No
Performance Share Award or portion thereof that is subject to the attainment or
satisfaction of a condition of a Performance Goal shall be distributed or
considered to be earned or vested until the Committee certifies in writing that
the conditions or Performance Goal to which the distribution, earning or vesting
of such Award is subject have been achieved.
B-7
7.06 Nontransferable. Plan
Share Awards and Performance Share Awards and rights to Plan Shares shall not be
transferable by a Recipient, and during the lifetime of the Recipient, Plan
Shares may only be earned by and paid to a Recipient who was notified in writing
of an Award by the Committee pursuant to Section 6.02 and/or 7.05(a), as the
case may be. No Recipient or Beneficiary shall have any right in or
claim to any assets of the Plan or Trust, nor shall the Corporation or any
Subsidiary Company be subject to any claim for benefits
hereunder.
ARTICLE
VIII
TRUST
8.01 Trust. The
Trustee shall receive, hold, administer, invest and make distributions and
disbursements from the Trust in accordance with the provisions of this Plan and
Trust and the applicable directions, rules, regulations, procedures and policies
established by the Committee pursuant to this Plan.
8.02 Management
of Trust. It is the intent of this Plan and Trust that the
Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is appropriate to meet the obligations of
the Trust. In performing its duties, the Trustee shall have the power
to do all things and execute such instruments as may be deemed necessary or
proper, including the following powers:
(a) To invest
up to one hundred percent (100%) of all Trust assets in Common Stock without
regard to any law now or hereafter in force limiting investments for trustees or
other fiduciaries. The investment authorized herein may constitute
the only investment of the Trust, and in making such investment, the Trustee is
authorized to purchase Common Stock from the Corporation or from any other
source, and such Common Stock so purchased may be outstanding, newly issued, or
treasury shares.
(b) To invest
any Trust assets not otherwise invested in accordance with (a) above, in such
deposit accounts, and certificates of deposit, obligations of the United States
Government or its agencies or such other investments as shall be considered the
equivalent of cash.
(c) To cause
stocks, bonds or other securities to be registered in the name of a nominee,
without the addition of words indicating that such security is an asset of the
Trust (but accurate records shall be maintained showing that such security is an
asset of the Trust).
(d) To hold
cash without interest in such amounts as may in the opinion of the Trustee be
reasonable for the proper operation of the Plan and Trust.
(e) To employ
brokers, agents, custodians, consultants and accountants.
(f) To hire
counsel to render advice with respect to their rights, duties and obligations
hereunder, and such other legal services or representation as they may deem
desirable.
(g) To hold
funds and securities representing the amounts to be distributed to a Recipient
or his Beneficiary as a consequence of a dispute as to the disposition thereof,
whether in a segregated account or held in common with other assets of the
Trust.
B-8
Notwithstanding anything herein contained to the
contrary, the Trustee shall not be required to make any inventory, appraisal or
settlement or report to any court, or to secure any order of court for the
exercise of any power herein contained, or give bond.
8.03 Records
and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Board or the Committee.
8.04 Expenses. All
costs and expenses incurred in the operation and administration of this Plan
shall be borne by the Corporation or, in the discretion of the Corporation, the
Trust.
8.05 Indemnification. Subject
to the requirements of applicable laws and regulations, the Corporation shall
indemnify, defend and hold the Trustee harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Trustee’s powers
and the discharge of their duties hereunder, unless the same shall be due to
their gross negligence or willful misconduct.
ARTICLE
IX
MISCELLANEOUS
9.01 Adjustments
for Capital Changes. The aggregate number of Plan Shares
available for distribution pursuant to the Plan Share Awards, the number of
Shares to which any unvested Plan Share Award relates and the maximum number of
Plan Shares which may be granted to any Employee, to any Non-Employee Director
or to all Non-Employee Directors as a group shall be proportionately adjusted
for any increase or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the effective date of this Plan resulting from any
split, subdivision or consolidation of shares or other capital adjustment, the
payment of a stock dividend or other increase or decrease in such shares
effected without receipt or payment of consideration by the
Corporation. If, upon a merger, consolidation, reorganization,
liquidation, recapitalization or the like of the Corporation or of another
corporation, the shares of the Corporation’s Common Stock shall be exchanged for
other securities of the Corporation or of another corporation, each Recipient of
a Plan Share Award shall be entitled, subject to the conditions herein stated,
to receive such number of shares of Common Stock or amount of other securities
of the Corporation or such other corporation as were exchangeable for the number
of shares of Common Stock of the Corporation which such Recipients would have
been entitled to receive except for such action.
9.02 Amendment
and Termination of Plan. The Board may, by resolution, at any
time amend or terminate the Plan, subject to any required shareholder approval
or any shareholder approval which the Board may deem to be advisable for any
reason, such as for the purpose of obtaining or retaining any statutory or
regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not,
without the consent of the Recipient, alter or impair his or her Plan Share
Award except as specifically authorized herein. Termination of this
Plan shall not affect Plan Share Awards previously granted, and such Plan Share
Awards shall remain valid and in effect until they (a) have been fully earned,
(b) are surrendered, or (c) expire or are forfeited in accordance with their
terms.
9.03 Employment
or Service Rights. Neither the Plan nor any grant of a Plan
Share Award, Performance Share Award or Plan Shares hereunder nor any action
taken by the Trustee, the Committee or the Board in connection with the Plan
shall create any right on the part of any Employee or Non-Employee Director to
continue in such capacity.
B-9
9.04 Voting
and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a shareholder in respect of any Plan Shares
covered by a Plan Share Award or Performance Share Award, except as expressly
provided in Sections 7.02, 7.04 and 7.05 above, prior to the time said Plan
Shares are actually earned and distributed to him.
9.05 Governing
Law. To the extent not governed by federal law, the Plan and
Trust shall be governed by the laws of the Commonwealth of
Pennsylvania.
9.06 Effective
Date. This Plan shall be effective as of the Effective Date,
and Awards may be granted hereunder no earlier than the date this Plan is
approved by the shareholders of the Corporation and prior to the termination of
the Plan. The implementation of this Plan is subject to the approval
of the Plan by a majority of the total votes eligible to be cast by the
Corporation’s shareholders.
9.07 Term
of Plan. This Plan shall remain in effect until the earlier of
(i) ten (10) years from the Effective Date, (ii) termination by the Board, or
(iii) the distribution to Recipients and Beneficiaries of all the assets of the
Trust.
9.08 Tax
Status of Trust. It is intended that the Trust established
hereby be treated as a Grantor Trust of the Corporation under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to
time.
[Remainder
of Page Intentionally Left Blank]
B-10
IN WITNESS
WHEREOF, the Corporation has caused this Agreement to be executed by its
duly authorized officers and the initial Trustees of the Trust established
pursuant hereto have duly and validly executed this Agreement, all on this
13th day of
February, 2008.
|
QUAINT
OAK BANCORP, INC.
|
TRUSTEES:
|
||
|
By:
|
/s/ Robert T.
Strong
|
/s/
Robert T. Strong
|
|
|
Robert
T. Strong
|
Robert
T. Strong
|
||
|
President
and Chief Executive Officer
|
|||
|
/s/
Diane J. Colyer
|
|||
|
Diane
J. Colyer
|
|||
|
/s/
John J. Augustine
|
|||
|
John
J. Augustine
|
|||
B-11
|
REVOCABLE
PROXY
|
|
[X] PLEASE MARK VOTES
AS IN THIS
EXAMPLE
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QUAINT OAK BANCORP,
INC. FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 2008
AND AT ANY ADJOURNMENT THEREOF.
The
undersigned hereby appoints the Board of Directors of Quaint Oak Bancorp, Inc.
or any successors thereto, as proxies with full powers of substitution, to
represent and vote, as designated below, all the shares of common stock of
Quaint Oak Bancorp, Inc. (the "Company") held of record by the undersigned on
March 31, 2008, at the Annual Meeting of Shareholders to be held at the
Company's corporate headquarters located at Lakeside Office Park, 607 Lakeside
Drive, Southampton, Pennsylvania 18966, on Wednesday, May 14, 2008, at 2:00
p.m., Eastern time, and any adjournment thereof.
|
1.
|
ELECTION
OF DIRECTORS FOR THREE-YEAR TERM (except as marked to the contrary
below)
|
FOR [
] WITHHOLD [
]
FOR ALL EXCEPT [
]
Nominees
for three-year term expiring in 2011:
George M.
Ager, James J. Clarke, Ph.D. and Marsh B. Spink
Instruction:
To withhold authority to vote for any individual nominee, mark "For All Except"
and write that nominee's name in the space provided below.
________________________________________________
2. PROPOSAL
TO APPROVE THE ADOPTION of the 2008 Stock Option Plan.
FOR [
] AGAINST [
] ABSTAIN
[ ]
|
3.
|
PROPOSAL
TO APPROVE THE ADOPTION of the 2008 Recognition and Retention Plan and
Trust Agreement.
|
FOR [
] AGAINST [
] ABSTAIN
[ ]
|
4.
|
PROPOSAL
TO RATIFY THE APPOINTMENT by the Board of Directors of Beard Miller
Company LLP as the Company's independent registered public accounting firm
for the year ending December 31,
2008.
|
|
5.
|
In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the
meeting.
|
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES OF THE
COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF DIRECTORS'
NOMINEES TO THE BOARD OF DIRECTORS, FOR THE PROPOSAL TO ADOPT THE 2008 STOCK
OPTION PLAN, FOR THE PROPOSAL TO ADOPT THE 2008 RECOGNITION AND RETENTION PLAN
AND TRUST AGREEMENT, FOR THE RATIFICATION OF AUDITORS AND OTHERWISE AT THE
DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME
PRIOR TO THE TIME IT IS VOTED AT THE ANNUAL MEETING.
|
Please
be sure to sign and date this Proxy in
the
box below.
|
Date
|
|||
|
|
Shareholder
sign above
|
Co-holder
(if any) sign above
|
||
-------------------------------------------------------------------------------------------------------------------------------------
▲
Detach above card, sign, date and mail in postage paid
envelope provided. ▲
QUAINT
OAK BANCORP, INC.
|
Please sign this proxy
exactly as your name(s) appear(s) on this proxy. When signing
in a representative capacity, please give title. When shares
are held jointly, only one holder need sign.
PLEASE
ACT PROMPTLY
SIGN,
DATE & MAIL YOUR PROXY CARD
TODAY
|
IF YOUR
ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
___________________________________________________
___________________________________________________
___________________________________________________
QUAINT
OAK BANCORP, INC.
EMPLOYEE
STOCK OWNERSHIP PLAN
VOTING
INSTRUCTION BALLOT
[X] PLEASE MARK
VOTES
AS IN
THIS EXAMPLE
The
undersigned hereby instructs the Trustees of the Quaint Oak Bancorp, Inc.
Employee Stock Ownership Plan ("ESOP") to vote, as designated below, all the
shares of Common Stock of Quaint Oak Bancorp (the "Company") allocated to my
account pursuant in the ESOP as of March 31, 2008, at the Annual Meeting of
Shareholders to be held at the Company's corporate headquarters located at
Lakeside Office Park, 607 Lakeside Drive, Southampton, Pennsylvania, 18966, on
Wednesday, May 14, 2008, at 2:00 p.m., Eastern time, and any adjournment
thereof.
|
1.
|
ELECTION
OF DIRECTORS FOR THREE-YEAR TERM
|
|
|
(except
as marked to the contrary below)
|
FOR [
]
WITHHOLD [
] FOR ALL
EXCEPT
[ ]
Nominees
for three-year term expiring in 2011:
George M.
Ager, James J. Clarke, Ph.D. and Marsh B. Spink
Instruction:
To withhold authority to vote for any individual nominee, mark "For All Except"
and write that nominee's name in the space
provided.______________________________________________
2. PROPOSAL
TO APPROVE THE ADOPTION of the 2008 Stock Option Plan.
FOR [
] AGAINST
[
] ABSTAIN
[ ]
|
3.
|
PROPOSAL
TO APPROVE THE ADOPTION of the 2008 Recognition and Retention Plan and
Trust Agreement.
|
FOR [
] AGAINST [
] ABSTAIN
[ ]
|
4.
|
PROPOSAL
TO RATIFY THE APPOINTMENT by the Board of Directors of Beard Miller
Company LLP as the Company's independent registered public accounting firm
for the year ending December 31,
2008.
|
FOR [
]
AGAINST [
] ABSTAIN
[ ]
|
5.
|
In
their discretion, the Trustees are authorized to vote upon such other
business as may properly come before the
meeting.
|
The Board
of Directors recommends a vote FOR the Board's nominees for director and FOR
Proposals 2, 3 and 4. Such votes are hereby solicited by the Board of
Directors.
Dated:
_______________, 2008
__________________________
Signature
If you return this card properly signed
but you do not otherwise specify, shares will be voted for the Board of
Directors' nominees for director and for Proposals 2, 3 and
4.
April 11,
2008
To: Participants
in Quaint Oak Bancorp, Inc.'s Employee Stock Ownership Plan
As
described in the attached materials, your voting instructions as a participant
in the Quaint Oak Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") are being
solicited in connection with the proposals to be considered at the upcoming
Annual Meeting of Shareholders. We hope you will take advantage of
the opportunity to direct the manner in which shares of common stock allocated
to your account in the ESOP will be voted.
Enclosed
with this letter is the Proxy Statement, which describes the matters to be voted
upon, Quaint Oak Bancorp, Inc.'s Annual Report to Shareholders and a voting
instruction ballot, which will permit you to vote the shares in your
account. After you have reviewed the Proxy Statement, we urge you to
vote your shares held pursuant to the ESOP by marking, dating, signing and
returning the enclosed voting instruction ballot to the Trustees of the
ESOP. The Trustees will tabulate the votes so they may vote the
shares in accordance with your instructions.
We urge
each of you to vote, as a means of participating in the governance of the
affairs of Quaint Oak Bancorp, Inc. If your voting instructions for the ESOP are
not received, the shares allocated to your account will generally not be voted,
subject to the fiduciary duties of the Trustees. While I hope that
you will vote in the manner recommended by the Board of Directors, the most
important thing is that you vote in whatever manner you deem
appropriate. Please take a moment to do so.
Please
note that the enclosed voting instruction ballot relates only to those shares
which have been allocated to you under the ESOP. You will receive
other voting material for those shares owned by you individually and not under
the ESOP.
Sincerely,
Robert T.
Strong
President and Chief
Executive Officer