Document:

EX-10.19

 EXHIBIT 10.19 

Wayne Bank 
 Executive
Annual Incentive Plan 
 Approved 2-26-19 By Board of
Directors 
  
  

 

 Wayne Bank 

EXECUTIVE ANNUAL INCENTIVE PLAN 
 I.
Introduction 
 A vital component of Wayne Bank’s success is the ability of the executive management team to meet and exceed performance
objectives consistent with the financial and strategic objectives of the bank and the best interests of the shareholders. The compensation plans at Wayne Bank are a critical component to ensuring the Bank’s ability to attract, hire, motivate
and retain executive team members who will maximize successful performance. 
 Wayne Bank intends to provide executives with a balanced mix of fixed and
variable pay. The intention of all incentive plans is to motivate, reward and reinforce performance and achievement of team and/or individual goals in support of the Bank’s strategic objective for growth and profitability. They provide the
opportunity for reward for meeting and exceeding established financial goals as well as recognition of individual achievements. 
 While risk is an inherent
aspect of business, our compensation plans are designed to reward employees for certain levels of performance without encouraging undue risk-taking which could materially threaten the safety and soundness of the organization or business unit. 

The following Executive Annual Incentive Plan has been developed as a meaningful compensation tool to encourage the growth and proper management of the Bank.
The major purposes of the plan are: 
  

	 	•	 	 To motivate and reward executives for positive Bank performance on an annual basis without encouraging undue
risk-taking 

  

	 	•	 	 To provide a form of variable compensation to executives, which is directly linked to their individual and
collective performance 

  

	 	•	 	 To emphasize the growth and profitability of the Bank in conjunction with the strategic direction of the Bank

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 The focus of this plan is to have the executive team achieve annual performance objectives which are
coordinated with the long term objectives of the Bank. This plan exists in conjunction with a long-term incentive plan which focuses on awards for performance consistent with the strategic plan and direction. The focus of this annual plan is to
motivate and reward participants to meet and exceed annual budgets and financial plans. 
 II. Plan Year 

The plan year for this program will be the calendar year. The effective date of the plan is January 1, 2019. The performance measures for this plan will
be determined, calculated and approved annually. 
 Ill. Participation 

Participation in the plan will be determined at the beginning of each plan year by the President & CEO, and approved by the Board Compensation
Committee and the Board of Directors. The President & CEO’s participation will be determined annually by the Board Compensation Committee and the Board of Directors. To participate, an executive must be a regular employee of the bank
with ongoing position responsibilities, which are executive in nature and have a meaningful impact on the Bank’s results. Generally, participants will include executive officers. 

Exhibit A will list participants each year and may include multiple levels of participation. These levels will generally be based upon position
responsibility. 
 An executive may become a new participant during the plan year if newly hired or promoted into an executive level. Any awards are pro-rated for the portion of the year in which participation occurs. The President & CEO makes final determination (with Board approval) of new participation during the plan year for any non-CEO position. 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 A participant’s eligibility ceases at termination of employment (other than death, retirement, or
disability) and the executive will not receive any awards under the plan for the year of termination. Termination as a result of death, retirement, or disability will provide pro-rated awards in the plan
through the last working date for the year in which termination occurred. 
 IV. Performance Factors 

The annual portion of the plan is based upon company financial performance factors which may change from year to year. In general, these factors may be
measures such as return on assets, return on equity, net income, earnings per share or similar indicators. The factors and weighing of the factors are determined at the beginning of each plan year. Each factor has quantifiable objectives consisting
of threshold, target and maximum goals. Additionally, a portion of each participant’s award may be based on unit, team, functional area, and/or individual performance objectives which are determined by management at the beginning of each year.
Generally, the President & CEO position may have most or all of his or her performance based on Bank performance and other executives may have a portion of their award based on functional area/individual performance. 

The Bank’s performance factors for each year’s annual portion of the plan are found in Exhibit B. Individual objectives are established and recorded
between the executive and the executive’s manager (usually the President & CEO). 
 While every effort has been made to ensure that this and
all Bank incentive plans do not motivate or reward undue risk taking, any results deemed to have been the result of inappropriate risk will be excluded from incentive payments. The Board of Directors has the discretion to lever incentive payments
down by as much as 100% if it is determined that excessive risk has been taken. The Board of Directors may also decrease payments if any significant regulatory issue has been identified by any regulatory agency. This can be done on an individual or
overall basis, as appropriate. 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 V. Award Calculation and Distribution 

Awards under the plan are calculated according to determination of the established performance factors at year end. Company performance between the threshold
and target, and target and maximum is interpolated for award calculations. Unit, team, and/or functional area performance, if applicable, is determined by management. Individual performance is determined by each participant’s manager according
to the achievement of objectives and approved by successive levels of management. Individual employee performance which is not meeting the position’s requirements (an annual performance evaluation which is less than satisfactory) will result in
no award granted to that individual for that year even though Company performance is above threshold. 
 Performance above the defined maximum levels, while
not necessarily undesirable or unrealistic, has the potential of requiring increased risk, therefore incentive opportunity will not increase for performance above maximum. 

Company performance below threshold will result in no award for that particular performance metric under the plan. 

All awards are paid through the payroll system less normal payroll tax withholding. Payment will be within 75 days after year end. The Bank shall deduct from
all payments under this Plan any federal, state or local taxes required by law to be withheld from such payments. Income from this Plan is subject to the provisions of the 401(k) deferral plan if the Participant has elected to participate in the
401(k) plan. As such, this income is subject to deferral, taxing and matching provisions. Beyond this, there is no deferral feature nor is there any vesting feature of awards under this plan. Any participant terminating employment (except death,
retirement, or disability) prior to actual payment of award will forfeit that award. The award schedule for each year is found with the performance factors in Exhibit B. 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 VI. Clawback 

Awards will be recalculated if the relevant company performance measures upon which they are based are materially restated or otherwise adjusted within the 36-month period following the public release of the financial information. Any material overpayments or adjustments required by law will be owed back to the company. 

VII. Administration 
 At least annually, the highest
ranking risk officer will review this plan and provide a detailed report including a detailed assessment regarding any risk issues inherent in the plan. This risk report and the plan document in full will be reviewed by the Compensation Committee of
the Board of Directors to ensure that the plan design is consistent with the compensation philosophy of the Bank and that the plan does not motivate undue risk taking. The annual review will also include the market competitiveness of the plan, the
plan’s alignment with the bank’s strategic plan, an assessment of how the plan meets the objectives in the Introduction of this document, plus the plan’s impact on the overall safety and soundness of the bank. The Compensation
Committee will then provide a report and recommendations to the full Board of Directors who are responsible to approve the plan. The Board of Directors of the bank may amend the plan at any time. 

Once established, performance factors are intended to remain in place for the year. 

Participation, performance factors, thresholds, targets, maximums and any other participation features are established each plan year and may change from year
to year according to the strategic objectives of the company. 
 The plan does not constitute a contract of employment, and participation in the plan does
not give any employee the right to be retained in the service of the bank or any right or claim to an award under the plan unless specifically accrued under the terms of this plan. Designation as a plan participant conveys the opportunity, but not
the right, to any awards conferred under the Plan. 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 Any right of a participant or his or her beneficiary to the payment of an award under this plan may not be
assigned, transferred, pledged or encumbered. 
 Any adjustments to the financial performance results utilized in this plan because of extraordinary gains
or losses or other items must be approved by the Board of Directors. 
 VIII. Governing Law 

Except as preempted under federal law, the provisions of the Plan shall be construed, administered and enforced in accordance with the domestic internal law of
the Commonwealth of Pennsylvania. 
 IX. Plan Approval 

This plan has been approved by the Board of Directors of Wayne Bank on February 26, 2019. 

 

			
	By	 	    
		
		 	Board of Directors
		 	Wayne Bank

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

							
	Exhibit	  	A	  	—	  	Participation
	Plan Year 2019	  		  		  	

 (Participating employees and their participant categories should be listed at the beginning of each year and adjusted for
changes in participation throughout the year.) 
 Category A —  President & CEO — Lewis J. Critelli 

Category B —  Chief Financial Officer — William S. Lance 

 Chief Operations Officer — Robert J. Mancuso 

 Chief Credit Officer — John F. Carmody 

 Chief Lending Officer — James F. Burke 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 Exhibit B — Bank Performance Factors and Award Schedule 

Plan Year 2019 — Performance measures at target below are based on the approved 2019 annual budget. 

Category A 
 COMPANY
GOALS 
 Performance Measures 

Net Income (50%) 
  

							
	 Threshold
	  	Target	  	Maximum	 
	 $11,612,000
	  	$14,515,000	  	$	17,418,000	 

 Earnings Per Share (50%) 
  

							
	 Threshold
	  	Target	  	Maximum	 
	 $1.86
	  	$2.32	  	$	2.68	 

 AWARDS 

(% of Base Pay) 
  

							
	 Threshold
	  	Target	 	Maximum	 
	 10%
	  	30%	 	 	45	% 

 Individual Performance Lever 

+/- 20% of the award based on individual performance as determined by BOD 

POTENTIAL AWARD RANGE 

(% of Base Pay) 
  

							
	 Threshold
	  	 Target
	 	 Maximum
	 
	 8-12%
	  	24-36%	 	 	36-54	% 

 Parameters 

1. Company Measures will be 50% Net Income and 50% Earnings Per Share. 

2. Either Financial Measure must meet threshold to initiate an award in the plan. 

3. Will interpolate awards between threshold, target, and maximum. 

4. Performance above maximum will be paid at maximum award level. 

5. Board of Directors has the discretion to lever incentive payments down by as much as 100% if it is determined that excessive risk has been
taken or if significant regulatory issues exist. This can be done on an individual or overall basis, as appropriate. 
 6. Pay is defined as
total actual base pay for the applicable plan year. 

  

			
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EXECUTIVE ANNUAL INCENTIVE PLAN 
  

 

 Exhibit B - Bank Performance Factors and Award Schedule 

Plan Year 2019 - Performance measures at target below are based on the approved 2019 annual budget. 

Category B 
 COMPANY
GOALS 
 Performance Measures 

Net Income (50%) 
  

							
	 Threshold
	  	Target	  	Maximum	 
	 $11,612,000
	  	$14,515,000	  	$	17,418,000	 

 Earnings Per Share (50%) 
  

							
	 Threshold
	  	Target	  	Maximum	 
	 $1.86
	  	$2.32	  	$	2.68	 

 AWARDS 

(% of Base Pay) 
  

							
	 Threshold
	  	 Target
	 	 Maximum
	 
	 10%
	  	25%	 	 	35	% 

 Individual Performance Lever 

+1- 20% of the award based on individual performance as determined by Pres.& CEO 

POTENTIAL AWARD RANGE 

(% of Base Pay) 
  

							
	 Threshold
	  	 Target
	 	 Maximum
	 
	 8-12%
	  	20-30%	 	 	28-42	% 

 Parameters 
  

	 	1.	 Company Measures will be 50% Net Income and 50% Earnings Per Share. 

 

	 	2.	 Either Financial Measure must meet threshold to initiate an award in the plan. 

 

	 	3.	 Will interpolate awards between threshold, target, and maximum. 

 

	 	4.	 Performance above maximum will be paid at maximum award level. 

 

	 	5.	 Board of Directors has the discretion to lever incentive payments down by as much as 100% if it is determined
that excessive risk has been taken or if significant regulatory issues exist. This can be done on an individual or overall basis, as appropriate. 

  

	 	6.	 Pay is defined as total actual base pay for the applicable plan year. 

 

	 	7.	 Individual goals will be established at the beginning of each year. 

  

			
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Exhibit 4.5

DESCRIPTION OF CAPITAL STOCK 

The following description of our capital stock, certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, and certain provisions of Delaware law are summaries. You should also refer to the amended and restated certificate of incorporation and the amended and restated bylaws, which are filed as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.6 is part. 

General 

Our amended and restated certificate of incorporation authorizes us to issue up to 500,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share, all of which shares of preferred stock are undesignated. 

Common Stock 

Voting Rights 

Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Under our amended and restated certificate of incorporation and amended and restated bylaws, our stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors are able to elect all of the directors standing for election, if they should so choose. 

Dividends 

Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds. 

Liquidation 

In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock. 

Rights and Preferences 

Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future. 

Preferred Stock 

Our board of directors has the authority, without further action by our stockholders, to issue up to 20,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. 

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights attached to that preferred stock. 

We have no present plans to issue any shares of preferred stock. 

Warrants 

As of December 31, 2019, warrants to purchase an aggregate of 134,716 shares of our common stock at a weighted-average exercise price of $8.2306 per share were outstanding. The warrants contain a provision for the adjustment of the exercise price and the number of shares issuable upon the exercise of the applicable warrant in the event of certain stock dividends, stock splits, reorganizations, reclassifications and consolidations. For more information, see Note 15,“Convertible Preferred Stock Warrants and Common Stock Warrants" to the Notes to the Consolidated Financial Statements for more information. 

 

 

Registration Rights 

Certain holders of shares of our common stock are entitled to certain rights with respect to registration of such shares under the Securities Act pursuant to the terms of an investors' rights agreement. These shares are collectively referred to herein as registrable securities. 

The investors' rights agreement provides the holders of registrable securities with demand, piggyback and S-3 registration rights as described more fully below. 

Demand Registration Rights 

The holders of a majority of the registrable securities then outstanding have the right to make up to two demands that we file a registration statement under the Securities Act covering the registration of the registrable securities then outstanding and with an anticipated aggregate offering price of at least $10.0 million, net of underwriting discounts and expenses, subject to specified exceptions. 

Piggyback Registration Rights 

If we register any securities for public sale, the holders of our registrable securities then outstanding will each be entitled to notice of the registration and will have the right to include their shares in the registration statement. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement, provided that the registration does not include shares of any other selling stockholder. If the registration does not include shares of any other selling stockholder, any or all of the registrable securities may be excluded from such registration. 

Registration on Form S-3 

If we are eligible to file a registration statement on Form S-3, the holders have the right to demand that we file registration statements on Form S-3; provided, that at least 10% of the registrable securities then outstanding make the demand request and the aggregate amount of securities to be sold under the registration statement is at least $3.0 million, net of underwriting discounts and commissions. We are not obligated to effect a demand for registration on Form S-3 by holders of our registrable securities more than twice during any 12-month period. The right to have such shares registered on Form S-3 is further subject to other specified conditions and limitations. 

Expenses of Registration 

We will pay all expenses relating to any demand, piggyback or Form S-3 registration, other than underwriting discounts and commissions, subject to specified conditions and limitations. 

Termination of Registration Rights 

The registration rights will terminate upon the earlier of the following to occur: (i) such time after this offering in which the holder of registrable securities holds one percent or less of our common stock and all registrable securities held by such holder (and together with any affiliate of the holder with whom such holder must aggregate its sales under Rule 144 of the Securities Act) can be sold in any three-month period without registration in compliance with Rule 144 of the Securities Act or (ii) after the consummation of a "deemed liquidation event", as described and defined in our amended and restated certificate of incorporation, as amended from time to time. 

Anti-Takeover Provisions 

Anti-Takeover Statute 

We are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a publicly held Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

	
 
	
•
	
before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;  

	
 
	
•
	
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or   

	
 
	
•
	
on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder.

 

 

In general, Section 203 defines a "business combination" to include the following:

	
 
	
•
	
any merger or consolidation involving the corporation and the interested stockholder; any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.

In general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation. 

Anti-Takeover Effects of Certain Provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws 

Our amended and restated certificate of incorporation provides for our board of directors to be divided into three classes with staggered three-year terms. Only one class of directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation and amended and restated bylaws also provide that directors may be removed by the stockholders only for cause upon the vote of a majority of our outstanding common stock. Furthermore, the authorized number of directors may be changed only by resolution of the board of directors, and vacancies and newly created directorships on the board of directors may, except as otherwise required by law or determined by the board, only be filled by a majority vote of the directors then serving on the board, even though less than a quorum. 

Our amended and restated certificate of incorporation and amended and restated bylaws also provide that all stockholder actions must be effected at a duly called meeting of stockholders. Our amended and restated bylaws also provides that only our chairman of the board, chief executive officer or the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors may call a special meeting of stockholders. 

Our amended and restated bylaws also provides that stockholders seeking to present proposals before our annual meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely advance notice in writing, and, subject to applicable law, will specify requirements as to the form and content of a stockholder's notice. 

Our amended and restated certificate of incorporation and amended and restated bylaws also provide that the stockholders cannot amend many of the provisions described above except by a vote of a majority of our outstanding common stock. 

The combination of these provisions make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control. 

These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. We believe that the benefits of these provisions, including increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms. 

Choice of Forum 

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty; (iii) any action asserting a claim against us arising under the Delaware General Corporation Law; (iv) any action regarding our amended and restated certificate of incorporation or our amended and restated bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine. Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act; provided however, that in light of the Delaware Chancery Court’s opinion issued on December 19, 2018 in Sciabacucchi v. Salzberg, C.A. No. 2017-0931-JTL, which is currently being appealed to the Delaware Supreme Court, the Company does not intend to enforce this federal forum selection provision while the appeal is in process. 

 

 

Transfer Agent and Registrar 

The transfer agent and registrar for our common stock is Computershare Limited. 

Listing 

Our common stock is currently listed on the NASDAQ Capital Market under the trading symbol "SSTI."

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