The parent company of Orrstown Bank will rescind the eligibility requirements for its board members who were the subject of a shareholder lawsuit.
Orrstown Financial Services Inc. said Monday in a U.S. Securities and Exchange Commission filing that it reached a settlement Jan. 31 with PL Capital Group.
Under the agreement, PL Capital will withdraw the suit it filed Jan. 7. In exchange, Orrstown will repeal recent amendments to its bylaws that prohibited board members from living more than 50 miles from Orrstown’s Shippensburg headquarters and from serving on other bank boards.
PL Capital contended in the lawsuit that the requirements, which took effect Nov. 19, were implemented to prevent either of its principals, Richard Lashley and John Palmer, from serving on Orrstown’s board.
Orrstown passed the requirements after PL Capital notified the bank of its intent to nominate Lashley, the suit said.
As part of the settlement, PL Capital promised to withdraw Lashley’s candidacy and refrain from participating in any shareholder proposals or proxy contests during Orrstown’s annual meeting this year.
In addition, PL Capital promised to notify Orrstown within 10 days of the bank releasing its third-quarter results regarding whether it will nominate a candidate for the board in 2014. If not, the investor group promised to refrain from participating in any shareholder proposals or proxy contests through the end of that year’s annual meeting.
Orrstown pledged to reimburse PL Capital for up to $125,000 in legal fees.
PL Capital owns 6.9 percent of Orrstown’s common stock, making it the bank’s largest shareholder. It has offices in Illinois and New Jersey and is considered one of the nation’s leading shareholder activist firms.
“We are pleased that we were able to reach an amicable settlement,” Orrstown President Tom Quinn said in a statement. “We look forward to a great relationship with them going forward.”