SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
LITTLE FALLS BANCORP, INC.
--------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LITTLE FALLS BANCORP, INC.
86 Main Street
Little Falls, New Jersey 07424
March 25, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Little Falls
Bancorp, Inc. (the "Company"), I cordially invite you to attend the Annual
Meeting of Stockholders to be held at The Bethwood, located at 38 Lackawanna
Avenue, Totowa, New Jersey on Thursday, April 21, 1998 at 3:00 p.m. The attached
Notice of Annual Meeting and Proxy Statement describe the formal business to be
transacted at the Annual Meeting.
The matters to be considered by stockholders at the Annual Meeting are
described in the accompanying Notice of Annual Meeting and Proxy Statement. The
Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interest of the Company and its
stockholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from voting
in person at the Annual Meeting, but will assure that your vote is counted if
you are unable to attend the Annual Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ Leonard G. Romaine
Leonard G. Romaine
President
<PAGE>
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LITTLE FALLS BANCORP, INC.
86 MAIN STREET
LITTLE FALLS, NEW JERSEY 07424
(973) 256-6100
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 21, 1998
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Little Falls Bancorp, Inc. (the "Company") will be held at The Bethwood,
located at 38 Lackawanna Avenue, Totowa, New Jersey on April 21, 1998, at 3:00
p.m. A proxy card and a proxy statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The election of two directors of the Company;
2. The ratification of the amendment to the Little Falls Bancorp, Inc.
1996 Stock Option Plan (the "1996 Stock Option Plan" or "Option Plan");
3. The ratification of the amendment to the Little Falls Bank Management
Stock Bonus Stock Plan (the "Restricted Stock Plan" or "MSBP"); and
4. The ratification of the appointment of Radics & Co., LLC as independent
auditors of the Company for the fiscal year ending December 31, 1998;
and
5. The transaction of such other matters as may properly come before the
Meeting or any adjournments thereof. The Board of Directors is not
aware of any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the date
specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Stockholders of record at the close
of business on March 23, 1998 are the stockholders entitled to vote at the
Meeting and any adjournments thereof.
EACH STOCKHOLDER, WHETHER OR NOT HE PLANS TO ATTEND THE MEETING, IS REQUESTED TO
SIGN, DATE, AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE REVOKED BY
FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED
PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE
HIS PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE MEETING. HOWEVER,
IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU
WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE IN PERSON AT
THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anne Bracchitta
Anne Bracchitta
Secretary
Little Falls, New Jersey
March 25, 1998
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
LITTLE FALLS BANCORP, INC.
86 MAIN STREET
LITTLE FALLS, NEW JERSEY 07424
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ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Little Falls Bancorp, Inc. (the
"Company") to be used at the 1998 Annual Meeting of Stockholders of the Company
which will be held at The Bethwood, located at 38 Lackawanna Avenue, Totowa, New
Jersey on April 21, 1998, at 3:00 p.m. local time (the "Meeting"). The
accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders on or about March 25, 1998. The Company
is the parent company of Little Falls Bank (the "Bank"). The Company was formed
as a New Jersey corporation in August 1995 at the direction of the Bank to
acquire all of the outstanding stock of the Bank issued in connection with the
Bank's mutual-to-stock conversion on January 5, 1996 (the "Conversion"). Prior
to January 5, 1996, the Company had no stockholders and no operations.
Therefore, information prior to January 5, 1996 involves information of the
Bank.
At the Meeting, stockholders will consider and vote upon (i) the
election of two directors (ii) the ratification of the amendment to the 1996
Stock Option Plan, (iii) the ratification of the amendment to the Restricted
Stock Plan, and (iv) the ratification of the appointment of Radics & Co., LLC as
independent auditor of the Company for the fiscal year ending December 31, 1998.
The Board of Directors of the Company (the "Board" or the "Board of Directors")
knows of no additional matters that will be presented for consideration at the
Meeting. Execution of a proxy, however, confers on the designated proxy holder
discretionary authority to vote the shares represented by such proxy in
accordance with their best judgment on such other business, if any, that may
properly come before the Meeting or any adjournment thereof.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein. Where no instructions are
indicated, signed proxies will be voted "FOR" the nominees for directors set
forth below and "FOR" the other listed proposals. The proxy confers
discretionary authority on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable to serve, or
for good cause will not serve, and matters incident to the conduct of the
Meeting.
<PAGE>
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on March 23, 1998
(the "Voting Record Date"), are entitled to one vote for each share of common
stock of the Company (the "Common Stock") then held. As of the Voting Record
Date, the Company had 2,477,525 shares of Common Stock issued and outstanding.
The Certificate of Incorporation of the Company ("Certificate of
Incorporation") provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit") be entitled or permitted to any vote with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Certificate of Incorporation and includes
shares beneficially owned by such person or any of his or her affiliates or
associates (as such terms are defined in the Certificate of Incorporation),
shares which such person or his or her affiliates or associates have the right
to acquire upon the exercise of conversion rights or options, and shares as to
which such person and his or her affiliates or associates have or share
investment or voting power, but shall not include shares beneficially owned by
any employee stock ownership plan or similar plan of the issuer or any
subsidiary.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non-Votes") will not be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors (Proposal I), the proxy being provided
by the Board enables a stockholder to vote for the election of the nominees
proposed by the Board, or to withhold authority to vote for one or more of the
nominees being proposed. Directors are elected by a plurality of votes of the
shares present in person or represented by proxy at a meeting and entitled to
vote in the election of directors.
As to the ratification of the amendment to the 1996 Stock Option Plan
(Proposal II), the ratification of the amendment to the Restricted Stock Plan
(Proposal III), and the ratification of independent auditors (Proposal III) and
all other matters that may properly come before the Meeting, by checking the
appropriate box, a stockholder may: vote "FOR" the item, (ii) vote "AGAINST" the
item, or (iii) vote to "ABSTAIN" on such item. Unless otherwise required by law,
all other matters shall be determined by a majority of votes cast affirmatively
or negatively without regard to (a) Broker Non-Votes or (b) proxies marked
"ABSTAIN" as to that matter. Votes for which the "ABSTAIN" box is selected for
Proposals II, III, and IV shall have the effect of a vote against such
proposals.
Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of the Voting Record Date, persons or groups who own more
than 5% of the Common Stock and the ownership of all executive officers and
directors of the Company as a group. The information provided is based upon
documents supplied to the Company by the persons providing such information
pursuant to the 1934 Act. The Company does not verify this
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<PAGE>
information. Other than as noted below, management knows of no person or group
that owns more than 5% of the outstanding shares of Common Stock at the Voting
Record Date.
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------------ --------------------
<S> <C> <C>
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404 240,000(1) 9.69%
First Manhattan
437 Madison Avenue
New York, New York 10022 240,000(2) 9.69%
Little Falls Bank
Employee Stock Ownership Plan
86 Main Street, Little Falls, New Jersey 07424 243,340(3) 9.82%
John Hancock Advisors, Inc.
Post Office Box 111
Boston, Massachusetts 02117 235,000(4) 9.49%
</TABLE>
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(1) Information provided is based on a Schedule 13G dated December 1997.
(2) Information provided is based on a Schedule 13G dated February 9, 1998
filed by First Manhattan Co. with the Company in accordance with
federal securities laws.
(3) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Company. These shares are
held in a suspense account and will be allocated among ESOP
participants annually on the basis of compensation as the ESOP debt is
repaid. The Board of Directors has appointed a committee consisting of
John P. Pullara, Leonard G. Romaine and Della Talerico to serve as the
ESOP administrative committee ("ESOP Committee") and Directors Barton,
Parker and Seugling to serve as the ESOP trustees ("ESOP Trustees").
The ESOP Committee or the Board instructs the ESOP Trustees regarding
investment of ESOP plan assets. The ESOP Trustees must vote all shares
allocated to participant accounts under the ESOP as directed by
participants. Unallocated shares and shares for which no timely voting
direction is received will be voted by the ESOP Trustees as directed by
the ESOP Committee. As of the Voting Record Date, 16,223 shares had
been allocated under the ESOP to participant accounts.
(4) Information provided is based on a Schedule 13G dated January 23, 1998.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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The Common Stock is registered pursuant to Section 12(g) of the 1934
Act. The officers and directors of the Company and beneficial owners of greater
than 10% of the Common Stock ("10% beneficial owners") are required to file
reports on Forms 3, 4, and 5 with the Securities and Exchange Commission ("SEC")
disclosing changes in beneficial ownership of the Common Stock. Based on the
Company's review of such ownership reports, to the Company's knowledge, no
executive officer, director, or 10% beneficial owner of the Company failed to
file such ownership reports on a timely basis for the fiscal year ended December
31, 1997.
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<PAGE>
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PROPOSAL I -- ELECTION OF DIRECTORS
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Election of Directors
The Certificate of Incorporation requires that the Board of Directors
be divided into three classes, each of which contains approximately one-third of
the members of the Board. The directors are elected by the stockholders of the
Company for staggered three-year terms, or until their successors are elected
and qualified. The Board of Directors currently consists of seven members. Three
directors will be elected at the Meeting to serve for three-year terms or until
a successor has been elected and qualified.
Raoul G. Barton and Albert J. Weite have been nominated by the Board of
Directors to serve as directors. Messrs. Barton and Weite are currently members
of the Board and have been nominated for three-year terms to expire in 2000. If
a nominee is unable to serve, the shares represented by all valid proxies will
be voted for the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate the vacancy. At
this time, the Board knows of no reason why a nominee might be unavailable to
serve.
The following table sets forth the nominees and the directors
continuing in office, their name, age, the year they first became a director of
the Company or the Bank, the expiration date of their current term as a
director, and the number and percentage of shares of the Common Stock
beneficially owned as of the Voting Record Date. Each director of the Company is
also a member of the Board of Directors of the Bank.
<TABLE>
<CAPTION>
Shares of
Year First Current Common Stock
Elected or Term to Beneficially Percent
Name Age(1) Appointed Expire Owned(2)(3) of Class
- ---- ------ --------- ------ ----------- --------
Board Nominees For Term To Expire In 2001
<S> <C> <C> <C> <C> <C>
Raoul G. Barton 73 1970 1998 32,681(4)(5)(6)(7) 1.32
Albert J. Weite 63 1976 1998 32,125(4)(5)(8) 1.30
THE BOARD OF DIRECTORS RECOMMENDS THAT ITS
NOMINEES BE ELECTED AS DIRECTORS
Directors Continuing In Office
John P. Pullara 66 1995 1999 44,940(9)(10) 1.81
George Kuiken 77 1954 1999 23,625(4)(11)(12) *
C. Evan Daniels 88 1949 2000 22,625(4)(11) *
Norman A. Parker 84 1953 2000 27,825(4)(5)(6)(13) 1.12
Edward J. Seugling 61 1970 2000 20,125(4)(5)(6)(14) *
All Directors and
Executive Officers as a
Group (10 persons) 246,664(14)(15) 9.82
</TABLE>
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<PAGE>
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* Less than 1.0%.
(1) As of December 31, 1997.
(2) As of the Voting Record Date.
(3) Pursuant to rules promulgated under the 1934 Act, an individual is
considered to beneficially own shares of Common Stock if he or she
directly or indirectly has or shares (1) voting power, which includes
the power to vote or to direct the voting of the shares; or (2)
investment power, which includes the power to dispose or direct the
disposition of the shares. Unless otherwise indicated, a director has
sole voting power and sole investment power with respect to the
indicated shares.
(4) Includes 6,083 shares of Common Stock that have been awarded under the
Management Stock Bonus Plan ("MSBP") and 3,500 shares of Common Stock
under the 1997 Directors Stock Compensation Plan ("DSCP") which are
subject to forfeiture under certain circumstances. Shares awarded under
the MSBP and DSCP vest equally over five year periods beginning July 9,
1997 and April 17, 1998, respectively.
(5) Includes options to purchase 3,041 shares of Common Stock pursuant to
the Little Falls Bancorp, Inc. 1996 Stock Option Plan Options ("1996
Stock Option Plan") which are immediately exercisable within 60 days of
the Voting Record Date. See "Direct and Executive Officer Compensation
- Director Compensation Stock awards."
(6) Excludes 243,340 unallocated shares of Common Stock held under the ESOP
for which such individual serves as one of three ESOP trustees.
Beneficial ownership is disclaimed with respect to such ESOP shares
held in a fiduciary capacity.
(7) Includes 4,793 shares held by Mr. Barton's IRA, 4,894 shares held by
the IRA of Mr. Barton's wife and 118 shares held by Mr. Barton's wife,
which Mr. Barton may be deemed to beneficially own.
(8) Includes 14,000 shares held jointly with Mr. Weite's wife, with whom
voting and dispositive power is shared, and 5,000 shares held by Mr.
Weite's IRA, which Mr. Weite may be deemed to beneficially own. Does
not include 6,000 shares owned by DOB&K, LLC, a partnership between Mr.
Weite's children, of which Mr. Weite disclaims beneficial ownership.
(9) Excludes 243,340 unallocated shares of Common Stock held under the ESOP
for which such individual serves as one of three members of the ESOP
Committee. Beneficial ownership is disclaimed with respect to such ESOP
shares held in a fiduciary capacity.
(10) Includes 15,000 shares held jointly with Mr. Pullara's wife, with whom
voting and dispositive power is shared. Includes options to purchase
6,083 shares of Common Stock pursuant to the 1996 Stock Option Plan
which are immediately exercisable within 60 days of the Voting Record
Date. Also includes 18,250 and 3,500 shares of restricted stock awarded
pursuant to the MSBP and DSCP, and awards vest equally over five year
periods beginning July 9, 1997 and April 17, 1998, respectively.
(11) Includes 5,000 shares held jointly with Mr. Kuiken's son and 5,000
shares jointly held with Mr. Kuiken's daughter, with whom voting and
dispositive power is shared, and 1,000 shares owned by Mr. Kuiken's
wife, which Mr. Kuiken may be deemed to beneficially own.
(12) Includes 10,000 shares held jointly with Mr. Daniels' son, with whom
voting and dispositive power is shared.
(13) Includes 15,000 shares held in trust, which Mr. Parker may be deemed to
beneficially own, and 200 shares held jointly with Mr. Parker's wife,
with whom voting and dispositive power is shared.
(14) Includes 7,390 shares held by Mr. Seugling's IRA and 110 shares held by
Custom Graphics & Design, Inc., which Mr. Seugling may be deemed to
beneficially own.
(15) Includes 4,265 allocated shares of Common Stock held for individual
employee participants under the ESOP. Excludes unallocated shares of
Common stock held under the ESOP. See note (6).
(16) Includes options to purchase 34,068 shares of Common Stock which are
immediately exercisable within 60 days of the Voting Record Date.
The following table sets forth the non-director executive officers of
the Company, their name, age, the year they first became an officer of the
Company or the Bank, and their current position with the Company. Executive
officers serve for a one-year term at the determination of the Board of
Directors.
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<PAGE>
<TABLE>
<CAPTION>
Year First
Appointed as Position with
Name of Individual Age(1) Officer(2) the Company or Bank
- ------------------ ------ ---------- -------------------
<S> <C> <C> <C>
Leonard G. Romaine 51 1967 President and Chief
Executive Officer
Richard A. Capone 48 1995 Vice President, Chief
Financial Officer
Anne Bracchitta 58 1997 Corporate Secretary
</TABLE>
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(1) As of December 31, 1997.
(2) Refers to the year the individual first became an officer of the
Company or the Bank.
Biographical Information
The business experience of each nominee for director, director and
executive officer of the Company is set forth below. All persons have held their
present positions for five years unless otherwise stated.
Directors
---------
Raoul G. Barton was elected Director of the Bank in 1970 and served as
Chairman from 1982 to 1994. Mr. Barton is a member of the Little Falls Masonic
Lodge. In 1990, Mr. Barton retired as owner of Barton Jewelers which he founded
in 1949.
C. Evan Daniels has served as Director of the Bank since 1949. Mr.
Daniels is a retired attorney and served as the Bank's legal counsel until 1995.
Mr. Daniels is a member of the American, New Jersey State and Passaic County Bar
Associations. He is also a member of the Little Falls Masonic Lodge.
George Kuiken has served as Director of the Bank since 1954. Mr. Kuiken
retired as President of New Jersey Rental Equipment, Inc.
Norman A. Parker has served as a Director since 1953. Mr. Parker was
Chairman of the Board of the Bank from 1973 to 1981 and President of the Bank
from 1965 to 1977. Mr. Parker is a retired funeral director. Mr. Parker is also
past President of the Passaic County Funeral Directors Association, past
President and charter member of the Passaic Valley Rotary Club, past member of
the Passaic Valley School Board, Elder of the First Reformed Church, charter
member of the Little Falls Parking Authority, charter member of the Mayor's
Committee for Senior Citizens and member of the Little Falls Masonic Lodge.
John P. Pullara was with the Bank from March 1955, serving as its
President from 1977 until his retirement on October 5, 1997. Mr. Pullara was
elected Director of the Bank in June of 1995. Mr. Pullara is also Director and
Treasurer of the Passaic County Historical Society, Director of the Garden State
Concert Band, Treasurer of the Little Falls Historical Society, Chairman of the
Little Falls Parking Authority and a member of the Little Falls Business
Association.
Edward J. Seugling has served as a Director of the Bank since 1970 and
became the Vice Chairman of the Board of Directors in 1994. Mr. Seugling is a
retired teacher at Passaic Valley High School and the sole owner of the Little
Falls Journal. He is a member of the Little Falls Business
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<PAGE>
Association, the Little Falls Masonic Lodge, the Little Falls Historical
Society, and the New Jersey Education Association. He is a member of the First
Reformed Church of Little Falls, and he has served as an elder and deacon of the
First Reformed Church. He was formerly Chairman of the Little Falls Rent
Leveling Board and was an associate member of the Little Falls Main Street
Development Corp.
Albert J. Weite has served as Chairman of the Board of Directors of the
Bank since 1994 and as a Director since 1976. Mr. Weite is a real estate
investor.
Executive Officers who are not Directors
----------------------------------------
Leonard G. Romaine has been employed by the Bank since 1967. He served
as Treasurer and Secretary of the Company and as Senior Vice President,
Secretary and Treasurer of the Bank until he was appointed President of the Bank
and Company on October 6, 1997. Mr. Romaine is a member of the Passaic County
Attorney Ethics Committee.
Richard A. Capone became employed by the Bank and Company in November
1995 as Chief Financial Officer. Prior to that, Mr. Capone was controller or
Treasurer at four different local financial institutions over the past 20 years.
Anne Bracchitta has been employed by the Bank since 1980. She was
appointed Corporate Secretary in 1997.
Stockholder Nominations
Pursuant to Article XI of the Certificate of Incorporation,
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company as set forth in Section 15 of the Company's bylaws ("Bylaws"). To
be timely, a stockholder's notice shall be delivered to, or mailed and received
at, the principal executive offices of the Company not less than 60 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders of the Company.
Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director
and as to the stockholder giving the notice (i) the name, age, business address,
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of Common Stock
which are beneficially owned by such person on the date of such stockholder
notice, and (iv) any other information relating to such person that is required
to be disclosed in solicitations of proxies with respect to nominees for
election as directors pursuant to Regulation 14A under the 1934 Act; and (b) as
to the stockholder giving the notice (i) the name and address, as they appear on
the Company's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such nominees and (ii) the class and number of
shares of Common Stock which are beneficially owned by such stockholder on the
date of such stockholder notice and, to the extent known, by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder notice. At the request of the Board of Directors, any
person nominated by, or at the direction of, the Board for election as a
director at an annual meeting shall furnish to the Secretary of the Company that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of the Bylaws. If the presiding
officer at the meeting determines that
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<PAGE>
a nomination was not made in accordance with the terms of the Bylaws, he shall
so declare at the annual meeting, and the defective nomination shall be
disregarded.
Meetings and Committees of the Board of Directors
The Company's Board of Directors conducts its business through meetings
of the Board and through activities of its committees. During the year ended
December 31, 1997, the Board of Directors of the Company held seven regular
meetings and no special meeting and the Board of Directors of the Bank held 12
regular meetings and no special meetings. No director attended fewer than 75% of
the total meetings of the Board of Directors of the Company and the Bank and
committees on which such director served during the fiscal year ended December
31, 1997.
The Audit Committee consists of the entire Board of Directors. The
Committee meets as needed to select independent auditor and to review audit
reports. The Committee further meets to review and approve internal controls for
financial reporting.
The Company's full Board of Directors act as a nominating committee for
selecting the management nominees for election as directors in accordance with
the Company's Bylaws. In its deliberations, the Nominating Committee considers
the candidate's knowledge of the banking business and involvement in community,
business and civic affairs. While the Board of Directors will consider nominees
recommended by stockholders, it has not actively solicited recommendations from
the Company's stockholders for nominees or, subject to the procedural
requirements set forth in the Company's Articles of Incorporation and Bylaws,
established any procedures for this purpose. During fiscal year 1997, the Board
of Directors met once as the Nominating Committee.
- --------------------------------------------------------------------------------
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
- --------------------------------------------------------------------------------
Director Compensation
Directors Fees. For fiscal year 1997, each member of the Board of
Directors received an attendance fee of $1,350 per regular meeting. Committee
members received an additional $675 per Asset-Liability Committee meeting
attended. No Committee fees are paid to Board members who are employees. For the
year ended December 31, 1997, total fees paid by the Company and the Bank to
directors were $170,000. Directors also are provided with broad medical
insurance coverage.
Directors Retirement and Consultation Plan. The Bank's Board adopted a
Directors' Consultation and Retirement Plan (the "Consultation Plan") on May 9,
1995. Such Consultation Plan provides retirement benefits to directors.
Management believes the Consultation Plan will help to insure that the Bank has
the continued services of these persons as directors to assist in the conduct of
the Bank's business affairs in the future. A director who has served as a
director for at least twenty years shall be a participant in the Consultation
Plan. A consulting director shall be paid a monthly retirement benefit under the
Consultation Plan equal to half of the director fee in effect at the time of
such retirement until the month following the date of death of the consulting
director. At the expiration of the period for which the participant is entitled
to benefits, his status as a consulting director shall cease. All benefits
payable under the plan will be paid by the Bank from current assets. There are
no tax consequences to either the director or the Bank prior to payment of
benefits. Upon receipt of payment of benefits, the director will recognize
taxable ordinary income in the amount of such payment received and the Bank
-8-
<PAGE>
will be entitled to recognize a tax-deductible compensation expense. In
addition, the Bank has a policy of continuing medical benefits for its retired
directors. For the year ended December 31, 1997, no benefits were paid under the
Consultation Plan and approximately $50,000 was accrued as an expense for the
Consultation Plan and the continuation of such medical benefits.
Stock Awards. On July 9, 1996, the stockholders of the Company approved
the Little Falls Bancorp 1996 Stock Option ("1996 Stock Option Plan") and the
Little Falls Bank Management Stock Bonus Plan ("MSBP"). Pursuant to the terms of
the 1996 Stock Option Plan, each non-employee director received, on the date of
stockholder approval options to purchase 15,208 shares of Common Stock. Under
the MSBP, the same non-employee directors received 6,083 shares of restricted
stock on the date of stockholder approval. The options granted to these
non-employee directors become first exercisable at a rate of 20% one year from
the date of grant and 20% annually thereafter. Restricted stock granted to these
non-employee directors will vest 20% one year from the date awarded and an
additional 20% annually, thereafter. In April 1997, the Company adopted the 1997
Directors Stock Compensation Plan authorizing the granting of up to 25,000
shares of Common Stock in the aggregate (representing less than 1% of total
shares outstanding at such time). Each non-employee director (seven persons) was
awarded 3,500 shares of Common Stock which shall vest over a five year period
beginning April 17, 1997.
Executive Compensation
Summary Compensation Table. The following table sets forth the
compensation paid to the chief executive officer during the fiscal year ended
December 31, 1997. All compensation paid to directors, officers and employees is
paid by the Bank. Except as listed below, no other executive officer received
cash compensation in excess of $100,000 during the fiscal year ended December
31, 1997.
<TABLE>
Long Term Compensation
Annual Compensation(1) Awards
--------------------------------------------------------------------------------
Securities
Restricted Underlying All
Name and Other Annual Stock Options/ Other
Principal Position Year Salary Bonus Compensation(2) Awards($) SARs(#) Compensation(7)
- ------------------ ---- ------ ----- ------------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard G. Romaine, 1997 $115,000 $15,000 $20,200 $ -- 3,000(4) $ --
President(3) 1996 $ 89,420 $ 7,750 $15,000 $129,274(5) 30,417(6) 30,176
</TABLE>
- ---------------------
(1) All compensation set forth above was paid by the Bank.
(2) Consists of Board of Director's fees. For fiscal year 1997, there were
no (a) perquisites over the lesser of $50,000 or 10% of the named
executive officer's total salary and bonuses for the year; (b) payments
of above-market preferential earnings on deferred compensation; (c)
payments of earnings with respect to long term incentive plans prior to
settlement or maturity: (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(3) John P. Pullara retired as President and Chief Executive Officer on
October 5, 1996. Mr. Romaine was appointed on October 6, 1996.
(4) Options vest equally over a five year period beginning December 9,
1998.
(5) Based upon 12,167 shares of restricted stock granted pursuant to the
MSBP (fair market value on date of grant of $10.625). Restricted stock
vest equally over a five year period beginning July 9, 1997. Dividends
are paid on the restricted stock and are accrued and held in arrears
until the restricted stock for which dividends were paid become vested.
(6) Options vest equally over a five year period beginning July 9, 1997.
(7) Includes 1,472 shares of stock held by the ESOP and allocated to Mr.
Romaine's account for 1996. Based on the closing price of the Common
Stock ($20.50 per share) at December 31, 1997. As of the date of this
proxy statement, shares had not yet been allocated for fiscal 1997.
-9-
<PAGE>
Employment Agreement. The Bank is a party to an employment agreement
with President and Chief Executive Officer Leonard G. Romaine. The employment
agreement is for a term of three years. Under the agreement, Mr. Romaine's
employment is terminable by the Bank for "just cause" as defined in the
agreement. If the Bank terminates Mr. Romaine without just cause, he will be
entitled to a continuation of his salary from the date of termination through
the remaining term of the agreement. The agreement contains a provision stating
that in the event of termination of employment or diminution of employment in
connection with, or within one year after, any change in control of the Bank,
Mr. Romaine will be paid in a lump sum an amount equal to 2.99 times his five
year average cash compensation. Had a change in control been deemed to have
occurred at completion of the last fiscal year, Mr. Romaine would have been
entitled to a lump sum payment of approximately $318,000. The payment that would
be made would be an expense to the Bank, thereby reducing net income and the
Bank's capital by that amount. The agreement is reviewed annually by the Board
of Directors and may be extended for additional one-year periods upon a
determination of the Board and satisfactory job performance within the Board's
sole discretion.
The Bank also entered into similar employment agreements with eight
officers of the Bank, with terms of three and two years and severance protection
upon a termination of employment or diminution of employment following a change
in control with such payment equalling between one and three times the current
annual compensation of such individuals. Upon a change in control, payment to
all executive officers as a group (nine persons), excluding Mr. Romaine, as of
December 31, 1997, would have equalled approximately $1.1 million.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Bank during the year ended December
31, 1997 consisted of Directors Weite, Barton and Seugling, all members of the
Board of Directors of the Company. Romaine was a member of the Compensation
Committee during fiscal 1997 but did not participate in matters involving his
personal compensation.
Report of the Compensation Committee on Executive Compensation
The Bank Compensation Committee meets annually to review compensation
paid to the chief executive officer. The Committee reviews various published
surveys of compensation paid to employees performing similar duties for
depository institutions and their holding companies, with a particular focus on
the level of compensation paid by comparable stockholder institutions in and
around the Bank's market area, including institutions with total assets of
between $100 million and $300 million. Although the Committee does not
specifically set compensation levels for executive officers based on whether
particular financial goals have been achieved by the Bank, the Committee does
consider the overall profitability of the Bank when making these decisions.
During the year ended December 31, 1997, Leonard G. Romaine, President
received an increase in his base salary from $89,420 to $115,000 due to his
completion of a full year as a president of a publicly owned company. The
Committee will consider the annual compensation paid to the presidents and chief
executive officers of publicly owned financial institutions nationally, in the
State of New Jersey and surrounding Northeastern states with assets of between
$100 million and $300 million and the individual job performance of such
individual in consideration of its specific salary increase decision with
respect to compensation to be paid to the president and chief executive officers
in the future.
-10-
<PAGE>
Compensation Committee:
Albert J. Weite Edward J. Seugling
Raoul G. Barton
Other Compensation
Employee Stock Ownership Plan. The Bank maintains an ESOP for the
exclusive benefit of participating employees. Participating employees are
employees who have completed one year of service with the Bank or its subsidiary
and have attained the age 21.
The ESOP be funded by contributions made by the Bank in cash or the
Common Stock. Benefits may be paid either in shares of the Common Stock or in
cash. The ESOP borrowed funds with which to acquire 243,340 shares of the Common
Stock issued in the Conversion, representing 8.0% of the Common Stock then
outstanding. The loan is secured by the shares purchased and earnings of ESOP
assets. Shares purchased with such loan proceeds will be held in a suspense
account for allocation among participants as the loan is repaid. This loan is
expected to be fully repaid in approximately 15 years. For the 1997 fiscal year,
the Bank recognized an expense of $255,000 regarding the ESOP.
1996 Stock Option Plan. The Company's Board of Directors adopted a 1996
Stock Option Plan, which was approved by the Company's stockholders on July 9,
1996. Pursuant to the 1996 Stock Option Plan, a number of shares equal to 10% of
the Common Stock issued in the Company's initial public offering (304,175 shares
of Common Stock) were reserved for issuance by the Company upon exercise of
stock options to be granted to officers, directors, and key employees of the
Company (or any present of future parent or subsidiary of the Company), from
time to time under the 1996 Stock Option Plan. The purpose of the 1996 Stock
Option Plan is to provide additional incentive to certain officers, directors,
and key employees by facilitating their purchase of a stock interest in the
Company. The 1996 Stock Option Plan became effective on July 9, 1996 and
provides for a term of ten years, after which no awards may be made, unless
earlier terminated by the Board of Directors pursuant to the terms of the 1996
Stock Option Plan.
An initial grant of stock options under the 1996 Stock Option Plan was
made to officers, directors, and key employees upon the Company's receipt of
stockholder approval on July 9, 1996, and the option exercise price is the
closing price of the Common Stock on the date of stockholder approval. The
initial grant of stock options were the only options granted to officers,
directors, and key employees during the fiscal year ended December 31, 1996. In
December 1997, certain officers and key employees were granted an aggregate of
16,000 additional options under the 1996 Stock Option Plan. The option exercise
price is the closing price of the Company's Common Stock on the date of the
grant. These were the only options granted to officers, directors and key
employees during the fiscal year ended December 31, 1997. As of the Record Date,
no stock options have been exercised pursuant to the 1996 Stock Option Plan.
-11-
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- ----------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options/ Annual Rate of Stock
Securities SARs Granted Price Appreciation for
Underlying to Employees Exercise or Option Term
Name Option/SARs in Fiscal Base Price ------------------------
Granted (#) Year ($/Sh) Expiration Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard G. Romaine 3,000 18.75 $20.00 Dec. 9, 2007 37,734 95,624
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leonard G. Romaine 0 $0 6,083 / 27,334 $60,070 / $240,298
</TABLE>
- ----------------------
(1) Based on an exercise price of $10.625 for options granted in the fiscal
year ended December 31, 1996, and $20.00 for options granted in the
fiscal year ended December 31, 1996 and the closing price of the Common
Stock on December 31, 1997 of $20.50.
Management Stock Bonus Plan. The board of directors of the Bank has
adopted the MSBP as a method of providing directors, executive officers and key
employees of the Bank with a proprietary interest in the Company in a manner
designed to encourage such persons to remain in the employment or service with
the Bank. Awards under the MSBP were made in recognition of prior and expected
future services to the Bank to those directors, executive officers and key
employees of the Bank responsible for implementation of the policies adopted by
the board of directors of the Bank, the profitable operation of the Bank, and as
a means of providing a further retention incentive and direct link between
compensation and the profitability of the Bank. Awards under the MSBP vest at a
rate of 20% per year beginning on the anniversary date of the date of grant. An
initial grant of 82,732 shares of restricted stock was made on July 9, 1997, the
date of stockholder approval of the MSBP. No awards were granted under the MSBP
in 1997.
Defined Benefit Plan. The Bank has a defined benefit pension plan
covering substantially all of its employees. The benefits are based on years of
service and employees' compensation. The Bank's funding policy is to fund
pension costs accrued. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
All full-time employees of the Bank are eligible to participate after
one year of service and attainment of age 21. A qualifying employee becomes
fully vested in the Pension Plan upon completion of five years service or when
the normal retirement age of 65 is attained. The Pension Plan is intended to
comply with the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
-12-
<PAGE>
The Pension Plan provides for monthly payments to each participating
employee at normal retirement age. The annual allowance payable under the
Pension Plan is equal to 25% of an employee's average monthly salary, up to
$650, plus 40% of average monthly salary in excess of $650, reduced for less
than 25 years of service, plus 1/4 of 1% of average monthly salary times years
of service. If benefits are paid prior to age 65, the benefit specified will be
reduced by 1/15 for each of the first five years and 1/30 for each of the next
five years and reduced actuarially for each additional year by which the
starting date of such benefit precedes age 65. There is a minimum monthly
benefit equal to 2% of monthly salary, times years of service up to 10 years.
The Pension Plan also provides for payments in the event of disability or death.
At December 31, 1997, Mr. Romaine had 28 years of credited service under the
Pension Plan. The Bank had a pension expense of $265,000 for the fiscal year
1997. At December 31, 1997, the Pension Plan had projected benefit obligations
greater than plan assets of approximately $1.2 million.
The following table shows the estimated annual benefits payable under
the Pension Plan in calendar year 1997 based on the respective employee's years
of benefit service and applicable average annual salary, as calculated under the
Pension Plan. Benefits under the Pension Plan are not subject to offset for
Social Security benefits.
<TABLE>
<CAPTION>
Years of Benefit Service
------------------------
15 20 25 30 35
-- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 20,000.................... $ 4,848 $ 6,464 $ 8,080 $ 8,330 $ 8,680
40,000.................... 10,398 13,864 17,330 17,830 18,330
60,000.................... 15,948 21,264 26,580 27,330 28,080
80,000.................... 21,498 28,664 35,830 36,830 37,830
100,000.................... 27,048 36,064 45,080 46,330 47,580
120,000.................... 32,598 43,464 54,330 55,830 57,330
150,000.................... 40,823 54,564 68,205 70,080 71,955
</TABLE>
-13-
<PAGE>
Performance Graph
Set forth below is a stock performance graph comparing the cumulative
total shareholder return on the Common Stock with (a) the cumulative total
stockholder return on stocks included in the Nasdaq Stock Market index and (b)
the cumulative total stockholder return on stocks included in the Nasdaq Bank
index, as prepared for Nasdaq by the Center for Research in Securities Prices
("CRSP") at the University of Chicago. All three investment comparisons assume
the investment of $100 as of the close of January 5, 1996 (the closing date of
initial issuance of the Common Stock). All of these cumulative total returns are
computed assuming the reinvestment of dividends. In the graph below, the periods
compared were January 5, 1996 and the Company's fiscal years ending of December
31, 1996 and 1997.
There can be no assurance that the Company's future stock performance
will be the same or similar to the historical stock performance shown in the
graph below. The Company neither makes nor endorses any predictions as to stock
performance.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
=================================================================================================
1/5/96 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CRSP Nasdaq U.S. Index $100.00 $125.52 $154.02
- -------------------------------------------------------------------------------------------------
CRSP Nasdaq Bank Index $100.00 $133.72 $225.91
- -------------------------------------------------------------------------------------------------
Little Falls Bancorp, Inc. $100.00 $113.00 $183.36
=================================================================================================
</TABLE>
-14-
<PAGE>
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Except as indicated below, no directors, executive officers, or
immediate family members of such individuals were engaged in transactions with
the Bank or any subsidiary involving more than $60,000 during the year ended
December 31, 1997. Furthermore, the Bank had no "interlocking" relationships
existing during the year ended December 31, 1997 in which (i) any executive
officer is a member of the Board of Directors/Trustees of another entity, one of
whose executive officers is a member of the Bank's Board of Directors, or where
(ii) any executive officer is a member of the compensation committee of another
entity, one of whose executive officers is a member of the Bank's Board of
Directors.
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. All loans
to executive officers and directors of the Bank have been made in the ordinary
course of business and on substantially the same terms and conditions, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with the Bank's other customers, and do not involve more than the
normal risk of collectibility nor present other unfavorable features. Recent
legislation permits savings institutions to make loans to executive officers,
trustees and principal shareholders ("insiders") on preferential terms, provided
the extension of credit is made pursuant to a benefit or compensation program of
the Bank that is widely available to employees of the Bank or its affiliates and
does not give preference to any insider over other employees of the Bank or
affiliate. All loans by the Bank to its directors and executive officers are
subject to OTS regulations restricting loans and other transactions with
affiliated persons of the Bank. Loans to executive officers and directors of the
Bank, the Company and their affiliates amounted to approximately $1,449,000 or
4.96% of the Bank's retained earnings at December 31, 1997.
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE AMENDMENT TO THE
1997 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Company's Board of Directors adopted the 1996 Stock Option Plan and
the stockholders approved the Plan on July 9, 1996 ("Effective Date"). Pursuant
to the Option Plan, up to 304,175 shares of Common Stock equal to up to 10% of
the total Common Stock issued in the Conversion are reserved for issuance by the
Company upon exercise of stock options to be granted to officers, directors, key
employees and other persons from time to time. The purpose of the Option Plan is
to attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to certain officers,
directors, key employees and other persons to promote the business success of
the Company and the Bank. The Company has recently adopted amendments to the
Option Plan ("Option Plan Amendments") and is submitting such amendments to the
stockholders for ratification. The full text of the Option Plan Amendments is
set forth as Appendix A to this Proxy Statement, and the summary of the Option
Plan Amendments provided below is qualified in its entirety by such reference.
Pursuant to regulations of the Office of the Thrift Supervision (the
"OTS") applicable to stock benefit plans established or implemented within one
year following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the Option Plan contains certain
-15-
<PAGE>
restrictions and limitations, including among others, provisions requiring the
vesting of options granted to occur no more rapidly than ratably over a five
year period and the resultant prohibition against accelerated vesting of option
grants upon the occurrence of an event other than the death or disability of the
option holder, such as in the case of a change in control of the Company or
retirement of an optionee.
Recent OTS interpretive letters permit amendment of stock benefit plans
to eliminate the provisions of the Option Plan which reflect the restrictions
and limitations described above, provided that stockholder ratification of such
amendments is obtained more than one year following the completion of the
mutual-to-stock conversion. The Board of Directors has adopted the Option Plan
Amendments, subject to ratification by stockholders of the Company, for the
purpose of eliminating such restrictions and limitations. The Company does not
have any present intention to engage in, nor is it aware of, any transaction
that would result in the accelerated vesting of Options as permitted by the
Option Plan Amendments and there can be no assurances that any such transaction
will occur. Nevertheless, the Board has determined that the implementation of
the Option Plan Amendments is in the best interests of the stockholders of the
Company, as well as the officers, directors and employees of the Company.
The Option Plan Amendments do not increase the number of shares
reserved for issuance under the Plan or alter the classes of individuals
eligible to participate in the Plan. In the event that the Option Plan
Amendments are not ratified by stockholders at the Meeting, the Option Plan
Amendments will not take effect, but the Option Plan will remain in effect. The
principal provisions of the Option Plan, as amended by the Option Plan
Amendments, are described below.
The Option Plan is administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the Company's
Board of Directors and serving at the pleasure of the Board (the "Option
Committee"). Members of the Option Committee shall be deemed "Non- Employee
Directors" within the meaning of Rule 16b-3 pursuant to the 1934 Act. The Option
Committee may select the officers and employees to whom options are to be
granted and the number of options to be granted based upon several factors
including prior and anticipated future job duties and responsibilities, job
performance, the Bank's financial performance and a comparison of awards given
by other institutions. A majority of the members of the Option Committee shall
constitute a quorum and the action of a majority of the members present at any
meeting at which a quorum is present shall be deemed the action of the Option
Committee.
Officers, directors, key employees and other persons who are designated
by the Option Committee are eligible to receive, at no cost to them, options
under the Option Plan (the "Optionees"). Each option granted pursuant to the
Option Plan shall be evidenced by an instrument in such form as the Option
Committee shall from time to time approve. Option shares may be paid for in
cash, shares of Common Stock, or a combination of both. The Company will receive
no monetary consideration for the granting of stock options under the Option
Plan. Further, the Company will receive no consideration other than the option
exercise price per share for Common Stock issued to Optionees upon the exercise
of those Options.
Shares issuable under the Option Plan may be from authorized but
unissued shares or shares purchased in the open market. An Option which expires,
becomes unexercisable, or is forfeited for any reason prior to its exercise will
again be available for issuance under the Option Plan. No Option or any right or
interest therein is assignable or transferable except by will or the laws of
descent and distribution. The Option Plan shall continue in effect for a term of
ten years from the Effective Date.
-16-
<PAGE>
Stock Options
The Option Committee may grant either Incentive Stock Options or
Non-Incentive Stock Options. In general, if an Optionee ceases to serve as an
employee of the Company for any reason other than disability or death, an
exercisable Incentive Stock Option may continue to be exercisable for three
months but in no event after the expiration date of the option, except as may
otherwise be determined by the Option Committee at the time of the award. In the
event of the disability or death of an Optionee during employment, an
exercisable Incentive Stock Option will continue to be exercisable for one year
and two years, respectively, to the extent exercisable by the Optionee
immediately prior to the Optionee's disability or death but only if, and to the
extent that, the Optionee was entitled to exercise such Incentive Stock Options
on the date of termination of employment. The terms and conditions of
Non-Incentive Stock Options relating to the effect of an Optionee's termination
of employment or service, disability, or death shall be such terms as the Option
Committee, in its sole discretion, shall determine at the time of termination of
service, disability or death, unless specifically determined at the time of
grant of such options.
Currently, the Option Plan requires that Options granted to Employees
or Directors become first exercisable no more rapidly than ratably over a
five-year period (with acceleration upon death or disability or a Change in
Control (as such terms are defined in the Option Plan); provided, however, that
such accelerated vesting is not inconsistent with the regulations of the OTS at
the time of such acceleration. As permitted by OTS interpretive letters, the
Option Plan Amendments will specifically authorize the acceleration of vesting
of Options upon a Change in Control; provided that such amendments are ratified
by the stockholders. Such Option Plan Amendments will affect previously awarded
Options and any Options that may be granted in the future. Pursuant to the
Option Plan, as amended by the Option Plan Amendments, upon a Change in Control,
all Options granted to such Participants that are outstanding as of the date of
a Change in Control will automatically become exercisable and non-forfeitable.
No shares of Common Stock shall be issued upon the exercise of an
Option until full payment therefor has been received by the Company, and no
Optionee shall have any of the rights of a stockholder of the Company until
shares of Common Stock are issued to such Optionee. Upon the exercise of an
Option by an Optionee (or the Optionee's personal representative), the Option
Committee, in its sole and absolute discretion, may make a cash payment to the
Optionee, in whole or in part, in lieu of the delivery of shares of Common
Stock. Such cash payment to be paid in lieu of delivery of Common Stock shall be
equal to the difference between the Fair Market Value of the Common Stock on the
date of the Option exercise and the exercise price per share of the Option. Such
cash payment shall be in exchange for the cancellation of such Option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee and the Company under Section 16(b) of the 1934 Act,
and regulations promulgated thereunder.
The Option Plan provides that the Board of Directors of the Company may
authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new Option at such time, and shall not materially decrease the
Optionee's benefits under the Option without the Optionee's consent, except as
otherwise provided under the Option Plan.
-17-
<PAGE>
Awards Under the Option Plan
The Board or the Option Committee shall from time to time determine the
officers, Directors, key employees and other persons who shall be granted Awards
under the Plan, the number of Awards to be granted to any Participant under the
Plan, and whether Awards granted to each such Participant under the Plan shall
be Incentive Stock Options and/or Non-Incentive Stock Options. In selecting
Participants and in determining the number of shares of Common Stock subject to
Options to be granted to each such Participant, the Board or the Option
Committee may consider the nature of the past and anticipated future services
rendered by each such Participant, each such Participant's current and potential
contribution to the Company and such other factors as may be deemed relevant.
Participants who have been granted an Award may, if otherwise eligible, be
granted additional Awards. In no event shall Shares subject to Options granted
to non-employee Directors in the aggregate under this Plan exceed more than 30%
of the total number of Shares authorized for delivery under this Plan, and no
more than 5% of total Plan shares may be awarded to any individual non-employee
Director. In no event shall Shares subject to Options granted to any Employee
exceed more than 25% of the total number of Shares authorized for delivery under
the Plan.
The table below presents information related to stock option awards
previously made under the Option Plan. Such Option Plan Amendments do not impact
the number of awards previously made. Such Option Plan Amendments confirm the
provisions of the Option Plan previously approved by stockholders with respect
to the accelerated vesting of awards upon a Change in Control. In accordance
with the Option Plan Amendment, all outstanding option awards shall become
immediately exercisable in the event of a Change in Control of the Company or
the Bank.
PRIOR AWARDS UNDER STOCK OPTION PLAN
------------------------------------
Name and Position Number of Options(1)(2)
- ----------------- -----------------------
Leonard G. Romaine
President and Chief Executive Officer.............. 33,417(5)
Raoul G. Barton
Director (3)....................................... 15,208(4)
Albert J. Weite
Director (3)....................................... 15,208(4)
Executive Officer Group (3 persons).................. 56,166(5)
Non-Executive Director Group
(7 persons)........................................ 121,665(4)
- ----------------------
(1) The exercise price of such Options is equal to the Fair Market Value of
the Common Stock on the date of grant (i.e., $10.625 on July 9, 1996
and $20.00 on December 9, 1997).
(2) Awards shall vest during periods of continued service as an employee,
director, or director emeritus. Upon vesting, awards shall remain
exercisable for ten years from the date of grant without regard to
continued service as an employee, director, or director emeritus.
(3) Nominee for Director.
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<PAGE>
(4) Options awarded to directors are first exercisable at a rate of 20% on
the one year anniversary of the date of grant and 20% annually
thereafter, during such period of service as a director or director
emeritus, and shall remain exercisable for ten years without regard to
continued service as a director or director emeritus. Upon disability
or death or a Change in Control (if approved by stockholders) of the
Company or the Bank, such awards shall be 100% exercisable.
(5) Options awarded to officers and employees are exercisable as follows:
Options awarded are first exercisable at the rate of 20% on the one
year anniversary from the date of grant and 20% annually thereafter
during periods of continued service as an employee, Director or
Director Emeritus. Such awards shall be 100% exercisable in the event
of death or disability, or upon a Change in Control of the Company or
the Bank. Options awarded to employees shall continue to be exercisable
during continued service as an employee, Director or Director Emeritus.
Options not exercised within three months of termination of service as
an employee shall thereafter be deemed non-incentive stock options.
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the stockholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the stockholders of the Company, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to each Option, the exercise price per share of such Option, and the
consideration to be given or received by the Company upon the exercise of any
outstanding Options; (ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or (iii) make such other adjustments in connection with the Option Plan as
the Option Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable. However, no action may be taken by the Option
Committee which would cause Incentive Stock Options granted pursuant to the
Option Plan to fail to meet the requirements of Section 422 of the Code without
the consent of the Optionee.
In the event of a Change in Control, the Option Committee and the Board
of Directors will take one or more of the following actions to be effective as
of the date of such Change in Control: (i) provide that such Options shall be
assumed, or equivalent options shall be substituted, ("Substitute Options") by
the acquiring or succeeding corporation (or an affiliate thereof), provided
that: (A) any such Substitute Options exchanged for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, and (B) the shares of
stock issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended,
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon consummation of the Change in
Control transaction a cash payment for each Option surrendered equal
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<PAGE>
to the difference between (1) the Fair Market Value of the consideration to be
received for each share of Common Stock in the Change in Control transaction
times the number of shares of Common Stock subject to such surrendered Options,
and (2) the aggregate exercise price of all such surrendered Options, or (ii) in
the event of a transaction under the terms of which the holders of the Common
Stock of the Company will receive upon consummation thereof a cash payment (the
"Merger Price") for each share of Common Stock exchanged in the Change in
Control transaction, to make or to provide for a cash payment to the Optionees
equal to the difference between (A) the Merger Price times the number of shares
of Common Stock subject to such Options held by each Optionee (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such surrendered Options in exchange for such
surrendered Options.
The power of the Option Committee to accelerate the exercise of Options
and the immediate exercisability of Options in the case of a Change in Control
of the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of Options. The power of the Option
Committee to make adjustments in connection with the Option Plan, including
adjusting the number of shares subject to Options and canceling Options, prior
to or after the occurrence of an extraordinary corporate action, allows the
Option Committee to adapt the Option Plan to operate in changed circumstances,
to adjust the Option Plan to fit a smaller or larger company, and to permit the
issuance of Options to new management following such extraordinary corporate
action. However, this power of the Option Committee may also have an
anti-takeover effect, by allowing the Option Committee to adjust the Option Plan
in a manner to allow the present management of the Company to exercise more
Options and hold more shares of the Company's Common Stock, and to possibly
decrease the number of Options available to new management of the Company.
Although the Option Plan Amendments may have an anti-takeover effect,
the Company's Board of Directors did not adopt the Option Plan Amendments
specifically for anti-takeover purposes. The exercise of such Options could make
it easier for the Board and management to block the approval of certain
transactions requiring the voting approval of 80% of the Common Stock in
accordance with the Articles of Incorporation. In addition, the exercise of such
Options could increase the cost of an acquisition by a potential acquiror.
Amendment and Termination of the Option Plan
The Board of Directors may alter, suspend or discontinue the Option
Plan, except that no action of the Board shall increase the maximum number of
shares of Common Stock issuable under the Option Plan, materially increase the
benefits accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless such
action of the Board shall be subject to ratification by the stockholders of the
Company.
Possible Dilutive Effects of the Option Plan
The Common Stock to be issued upon the exercise of Options awarded
under the Option Plan may either be authorized but unissued shares of Common
Stock or shares purchased in the open market. Because the stockholders of the
Company do not have preemptive rights, to the extent that the Company funds the
Option Plan, in whole or in part, with authorized but unissued shares, the
interests of current stockholders will be diluted. If upon the exercise of all
of the Options, the Company delivers newly issued shares of Common Stock (i.e.,
304,175 shares of Common Stock), then the impact to current
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<PAGE>
stockholders would be to dilute their current ownership percentages by
approximately 9.5%. The Option Plan Amendments do not increase the maximum
number of shares issuable under the Plan.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Option Plan will have
the following consequences:
1. The grant of an Option will not by itself result in the
recognition of taxable income to an Optionee nor entitle the
Company to a tax deduction at the time of such grant.
2. The exercise of an Option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code generally will
not, by itself, result in the recognition of taxable income to
an Optionee nor entitle the Company to a deduction at the time
of such exercise. However, the difference between the Option
exercise price and the Fair Market Value of the Common Stock
on the date of Option exercise is an item of tax preference
which may, in certain situations, trigger the alternative
minimum tax for an Optionee. An Optionee will recognize
capital gain or loss upon resale of the shares of Common Stock
received pursuant to the exercise of Incentive Stock Options,
provided that such shares are held for at least one year after
transfer of the shares or two years after the grant of the
Option, whichever is later. Generally, if the shares are not
held for that period, the Optionee will recognize ordinary
income upon disposition in an amount equal to the difference
between the Option exercise price and the Fair Market Value of
the Common Stock on the date of exercise, or, if less, the
sales proceeds of the shares acquired pursuant to the Option.
3. The exercise of a Non-Incentive Stock Option will result in
the recognition of ordinary income by the Optionee on the date
of exercise in an amount equal to the difference between the
exercise price and the Fair Market Value of the Common Stock
acquired pursuant to the Option.
4. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by
an Optionee at the time the Optionee recognizes such ordinary
income.
5. In accordance with Section 162(m) of the Code, the Company's
tax deductions for compensation paid to the most highly paid
executives named in the Company's Proxy Statement may be
limited to no more than $1 million per year, excluding certain
"performance-based" compensation. The Company intends for the
award of Options under the Option Plan to comply with the
requirement for an exception to Section 162(m) of the Code
applicable to stock option plans so that the Company's
deduction for compensation related to the exercise of Options
would not be subject to the deduction limitation set forth in
Section 162(m) of the Code.
Accounting Treatment
Neither the grant nor the exercise of an Option under the Option Plan
currently requires any charge against earnings under generally accepted
accounting principles. In certain circumstances,
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<PAGE>
Common Stock issuable pursuant to outstanding Options which are exercisable
under the Option Plan might be considered outstanding for purposes of
calculating earnings per share on a fully diluted basis. Amending the Option
Plan could be deemed to be a change in equity structure and therefore adversely
affect any proposed acquisition of the Company by an entity seeking to utilize
the "pooling of interests" method of accounting. Such adverse affect could limit
any acquisition of the Company during the two years from date of the amendment
to acquisitions that would be accounted for as a "purchase."
Stockholder Ratification
Stockholder ratification of the Option Plan Amendments is being sought
in accordance with the interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of this Proposal II.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
AMENDMENTS TO THE 1997 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE AMENDMENT TO
THE MANAGEMENT STOCK BONUS PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company has implemented the Restricted
Stock Plan as a method of providing directors, officers, and key employees of
the Bank with a proprietary interest in the Company in a manner designed to
encourage such persons to remain in the employment or service of the Bank. As
previously approved by stockholders of the Company, the Bank has contributed
sufficient funds to the MSBP for the purchase of 21,670 shares of Common Stock,
representing up to 4% of the aggregate number of shares issued in the
Conversion, in the open market. Common Stock by the MSBP was purchased at the
Fair Market Value of such stock on the date of purchase. Awards under the MSBP
were made in recognition of prior and expected future services to the Bank by
its directors, officers and key employees responsible for implementation of the
policies adopted by the Bank's Board of Directors and as a means of providing a
further retention incentive.
Pursuant to regulations of the OTS applicable to stock benefit plans
established or implemented within one year following the completion of a
mutual-to-stock conversion, the MSBP contains certain restrictions and
limitations, including among others, provisions prohibiting the accelerated
vesting of awards other than upon the death or disability of the award
recipient, such as in the case of a change in control of the Company or
retirement of a recipient of an MSBP award.
OTS interpretative letters permit the amendment of the MSBP to
eliminate the provisions of the MSBP which reflect the restrictions and
limitations described above, provided that stockholder ratification therefor is
obtained more than one year following the completion of the mutual-to-stock
conversion. The Board of Directors has adopted amendments to the MSBP, subject
to ratification by stockholders of the Company, for the purpose of eliminating
such restrictions and limitations (these changes to the MSBP are collectively
referred to herein as the "MSBP Amendments"). The Company does not have any
present intention to engage in any transaction that would result in the
accelerated vesting of awards under the MSBP and there can be no assurances that
any such transaction will occur. Nevertheless, the Board has determined that the
implementation of the MSBP Amendments is in the best interest of the
-22-
<PAGE>
stockholders of the Company, as well as the officers, directors and employees of
the Company. The MSBP Amendments do not increase the number of shares available
for distribution under the MSBP, change the MSBP's eligibility requirements, or
alter the types of restricted stock awards that may be made to participants in
the MSBP. In the event that the MSBP Amendments are not ratified by stockholders
at the Meeting, the MSBP Amendments will not take effect, but the MSBP will
remain in effect. The principal provisions of the MSBP, as it would be amended
by the MSBP Amendments, are described below. The full text of the MSBP
Amendments is set forth as Appendix B to this Proxy Statement, to which
reference is made, and the summary of the MSBP Amendments provided below is
qualified in its entirely by such reference.
Awards Under the MSBP
Currently the MSBP provides that the Shares covered by an Award will
vest not more rapidly than at the rate of 20% each year beginning one year from
the date of grant or upon the disability or death of the option holder. The MSBP
also provides that awards will accelerate vesting upon a Change in Control,
provided that such accelerated vesting is not inconsistent with regulations of
the OTS in effect at the time of such accelerated vesting. As permitted by OTS
interpretive letters, these restrictions on accelerated vesting upon a Change in
Control of the Company or the Bank may be removed through stockholder
ratification of the MSBP Amendments. Accordingly, pursuant to the MSBP, as
amended by the MSBP Amendments, all Shares covered by an outstanding Award will
become 100% vested upon the death, disability or a Change of Control of the
Company.
Benefits under the MSBP ("Plan Share Awards") may be granted at the
sole discretion of a committee comprised of not less than two directors who are
not employees of the Bank or the Company (the "MSBP Committee") appointed by the
Bank's Board of Directors. The MSBP is managed by trustees (the "MSBP Trustees")
who are non-employee directors of the Bank or the Company and who have the
responsibility to invest all funds contributed by the Bank to the trust created
for the MSBP (the "MSBP Trust"). Unless the terms of the MSBP or the MSBP
Committee specify otherwise, awards under the MSBP will be in the form of
restricted stock payable as the Plan Share Awards shall be earned and
non-forfeitable. Twenty percent (20%) of such awards shall be earned and
non-forfeitable on the one year anniversary of the date of grant of such awards,
and 20% annually thereafter, provided that the recipient of the award remains an
employee, Director or Director Emeritus during such period. A recipient of such
restricted stock will not be entitled to voting rights associated with such
shares prior to the applicable date such shares are earned. Dividends paid on
Plan Share Awards shall be held in arrears and distributed upon the date such
applicable Plan Share Awards are earned. Any shares held by the MSBP Trust which
are not yet earned shall be voted by the MSBP Trustees, as directed by the MSBP
Committee. If a recipient of such restricted stock terminates employment or
service for reasons other than death, disability, or a Change in Control of the
Company or the Bank, the recipient forfeits all rights to the awards under
restriction. If the recipient's termination of employment or service is caused
by death, disability, or a Change in Control of the Company or the Bank, all
restrictions expire and all shares allocated shall become unrestricted. Awards
of restricted stock shall be immediately non- forfeitable in the event of the
death or disability of such recipient, or upon a Change in Control of the
Company or the Bank, and distributed as soon as practicable thereafter. The
Board of Directors may terminate the MSBP at any time, and if it does so, any
shares not allocated will revert to the Company. The MSBP Amendments confirm the
provisions of the MSBP previously approved by the stockholders with respect to
the acceleration of vesting of awards upon a Change in Control.
-23-
<PAGE>
Plan Share Awards under the MSBP will be determined by the MSBP
Committee. In no event shall any Employee receive Plan Share Awards in excess of
25% of the aggregate Plan Shares authorized under the Plan. Plan Share Awards
may be granted to newly elected or appointed non-employee Directors of the Bank
subsequent to the effective date (as defined in the MSBP) provided that the Plan
Share Awards made to non-employee Directors shall not exceed 30% of total Plan
Share Reserve in the aggregate under the Plan or 5% of the total Plan Share
Reserve to any individual non-employee Director.
The aggregate number of Plan Shares available for issuance pursuant to
the Plan Share Awards and the number of shares to which any Plan Share Award
relates shall be proportionately adjusted for any increase or decrease in the
total number of outstanding shares of Common Stock issued subsequent to the
effective date (as defined in the MSBP) of the MSBP resulting from any split,
subdivision or consolidation of the Common Stock or other capital adjustment,
change or exchange of Common Stock, or other increase or decrease in the number
or kind of shares effected without receipt or payment of consideration by the
Company.
The following table presents information related to the previously
granted awards of Common Stock under the MSBP as authorized pursuant to the
terms of the MSBP. Such MSBP Amendments do not change the number of shares
awarded or other terms, except to ratify the accelerated vesting of such awards
upon a Change in Control of the Company or the Bank.
PRIOR AWARDS UNDER RESTRICTED STOCK PLAN
----------------------------------------
Number of Shares
Name and Position Previously Awarded (1)(2)
- ----------------- -------------------------
Leonard G. Romaine
President and Chief Executive Officer............. 12,167
Raoul G. Barton
Director (3)...................................... 6,083
Albert J. Weite
Director (3)...................................... 6,083
Executive Officer Group (3 persons) 15,817
Non-Executive Director Group (7 persons)............ 54,748(4)
- --------------------------
(1) All Plan Share Awards presented herein shall be earned at the rate of
20% on the one year anniversary of the date of grant and 20% annually
thereafter. All awards shall become immediately 100% vested upon death,
disability, or termination of service following a change in control (as
defined in the MSBP).
(2) Plan Share Awards shall continue to vest during periods of service as
an employee, director, or director emeritus.
(3) Nominee for director.
(4) Each of six (6) non-employee directors have been awarded 6,083 shares,
subject to applicable vesting. One director, who was a former employee,
has been awarded 18,250 shares, subject to applicable vesting.
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<PAGE>
Amendment and Termination of the Plan
The Board may amend or terminate the MSBP at any time. However, no
action of the Board may increase the maximum number of Plan Shares permitted to
be awarded under the MSBP, except for adjustments in the Common Stock of the
Company, materially increase the benefits accruing to Participants under the
MSBP or materially modify the requirements for eligibility for participation in
the MSBP unless such action of the Board shall be subject to ratification by the
stockholders of the Company.
Federal Income Tax Consequences
Common Stock awarded under the MSBP is generally taxable to the
recipient at the time that such awards become 100% vested and non-forfeitable,
based upon the Fair Market Value of such stock at the time of such vesting.
Alternatively, a recipient may make an election pursuant to Section 83(b) of the
Code within 30 days of the date of the award to elect to include in gross income
for the current taxable year the Fair Market Value of such stock as of the date
of the award. Such election must be filed with the Internal Revenue Service
within 30 days of the date of the granting of the stock award. The Company will
be allowed a tax deduction for federal tax purposes as a compensation expense
equal to the amount of ordinary income recognized by a recipient of Plan Share
Awards at the time the recipient recognizes taxable ordinary income. A recipient
of a Plan Share Award may elect to have a portion of such award withheld by the
MSBP Trust in order to meet any necessary tax withholding obligations.
Accounting Treatment
For accounting purposes, the Company will recognize a compensation
expense in the amount of the Fair Market Value of the Common Stock subject to
Plan Share Awards at the date of the award pro rata over the period of years
during which the awards are earned. Amending the MSBP could be deemed to be a
change in equity structure and therefore adversely affect any proposed
acquisition of the Company by an entity seeking to utilize the "pooling of
interests" method of accounting. Such adverse affect could limit any acquisition
of the Company during the two years from date of the amendment to acquisitions
that would be accounted for as a "purchase."
Stockholder Ratification
The Company is submitting the MSBP Amendments to stockholders for
ratification in accordance with interpretive letters of the OTS. An affirmative
vote of a majority of the votes cast at the Meeting on the matter, in person or
by proxy, is required to constitute stockholder ratification of this Proposal
III.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
AMENDMENTS TO THE RESTRICTED STOCK PLAN.
-25-
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL IV - RATIFICATION OF INDEPENDENT AUDITOR
- --------------------------------------------------------------------------------
The Board of Directors has approved the selection of Radics & Co., LLC
as its auditor for the 1998 fiscal year, subject to ratification by the
Company's stockholders. A representative of Radics & Co., LLC is expected to be
present at the Meeting to respond to stockholders' questions and will have the
opportunity to make a statement if he or she so desires.
In the event the appointment of Radics & Co., LLC is not ratified by
stockholders, the Board of Directors will consider the results of the vote and
determine the next course of action.
Ratification of the appointment of the auditor requires the approval of
a majority of the votes cast affirmatively or negatively by the stockholders of
the Company at the Meeting. The Board of Directors recommends that stockholders
vote "FOR" the ratification of the appointment of Radics & Co., LLC as the
Company's auditor for the 1998 fiscal year.
- --------------------------------------------------------------------------------
ANNUAL REPORTS AND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A copy of the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1997, as filed with the SEC, will be furnished without charge
to stockholders as of the record date upon written request to the Secretary,
Little Falls Bancorp, Inc., 86 Main Street, Little Falls, New Jersey 07424.
The Company's 1997 Annual Report to Stockholders, including financial
statements, will be mailed with this Proxy Statement on or about March 25, 1998
to all stockholders of record as of the close of business on February 28, 1998.
Any stockholder who has not received a copy of such Annual Report may obtain a
copy by writing to the Secretary of the Company. Such Annual Report is not to be
treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the persons named in the accompanying proxy.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
-26-
<PAGE>
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STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive offices at 86
Main Street, Little Falls, New Jersey 07424, no later than December 5, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anne Bracchitta
Anne Bracchitta
Secretary
Little Falls, New Jersey
March 25, 1998
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<PAGE>
EXHIBIT A
---------
Amendment
to the
LITTLE FALLS BANCORP, INC.
1997 Stock Option Plan
----------------------
1. Revision to the Plan by addition of the following Section 24 in its
entirety as follows:
24. Plan Provisions Effective as of April 17, 1998.
----------------------------------------------
(a) Immediate Vesting Upon a Change in Control.
Notwithstanding anything herein to the contrary, upon a Change in Control of the
Company or the Bank, all outstanding Awards shall be immediately 100%
exercisable and non-forfeitable.
<PAGE>
EXHIBIT B
---------
Amendment
to the
LITTLE FALLS BANK
Restricted Stock Plan and Trust Agreement
-----------------------------------------
1. Revision to the Plan by addition of the following Section 9.10 in its
entirety as follows:
9.10. Plan Provisions Effective as of April 17, 1998.
----------------------------------------------
Notwithstanding anything herein to the contrary, upon a
Change in Control of the Company or the Bank, all outstanding Awards shall be
immediately 100% earned and non-forfeitable.
<PAGE>
ANNEX I
- --------------------------------------------------------------------------------
LITTLE FALLS BANCORP, INC.
86 MAIN STREET
LITTLE FALLS, NEW JERSEY 07424
(973) 256-6100
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
April 21, 1998
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of Little Falls
Bancorp, Inc. (the "Company"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the 1998 Annual Meeting of Stockholders (the "Meeting"), to be held at The
Bethwood, 38 Lackawanna Avenue, Totowa, New Jersey on April 21, 1998, at 3:00
p.m. and at any and all adjournments thereof, in the following manner:
FOR WITHHELD
1. The election as director of all nominees
listed below: |_| |_|
Raoul G. Barton
Albert J. Weite
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
---------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. The ratification of the amendment to the
Little Falls Bancorp, Inc. 1996 Stock Option Plan. |_| |_| |_|
3. The ratification of the amendment to the
Little Falls Bank Management Stock Bonus Plan. |_| |_| |_|
4. The ratification of the appointment of Radics
& Co., LLC as independent auditors of Little
Falls Bancorp, Inc., for the fiscal year ending
December 31, 1998. |_| |_| |_|
</TABLE>
In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elects to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. The undersigned may also revoke this proxy by filing a
subsequently dated proxy or by written notification to the Secretary of the
Company of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated March 25, 1998 and an Annual Report to Stockholders.
Please check here if you
Dated: , 1998 [ ] plan to attend the Meeting.
------------------
- --------------------------------- ---------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- --------------------------------- ---------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
