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
FARNSWORTH BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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>
December 28, 1999
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Farnsworth
Bancorp, Inc.(the "Company"), I cordially invite you to attend the annual
meeting of stockholders to be held at the Days Inn, Route 206, Bordentown, New
Jersey on January 25, 2000, at 10:00 a.m. The attached Notice of Annual Meeting
of Stockholders and Proxy Statement describe the formal business to be
transacted at the meeting. During the meeting, I will also report on the
operations of the company. Directors and officers of the company will be present
to respond to your questions.
The Board of Directors has determined that the matters to be considered
at the meeting, described in the accompanying material, 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 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 Meeting, but will assure that your vote is counted if you are
unable to attend. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ Gary N.Pelehaty
---------------------------------------------
Gary N. Pelehaty
President and Chief Executive Officer
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789 Farnsworth Avenue o Bordentown, NJ 08505 o 609-298-0723 o Fax 609-298-5321
<PAGE>
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FARNSWORTH BANCORP, INC
789 FARNSWORTH AVENUE
BORDENTOWN, NEW JERSEY 08505
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 25, 2000
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NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of Farnsworth Bancorp, Inc. (the "Company") will be held at the Days
Inn, Route 206, Bordentown, New Jersey, on Tuesday, January 25, 2000, at 10:00
a.m.
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 Farnsworth Bancorp, Inc. 1999 Stock Option
Plan; and
3. The ratification of the Peoples Savings Bank Restricted Stock Plan.
The transaction of such other matters as may properly come before the
Meeting or any adjournments thereof may also be acted upon. The Board of
Directors is not aware of any other business to come before the Meeting. 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. Pursuant to the Company's Bylaws, the Board of
Directors has fixed the close of business on December 21, 1999, as the record
date for determination of the stockholders entitled to vote at the Meeting and
any adjournments thereof.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY SIGNED 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 PERSONALLY 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/ Charles Alessi
--------------------------------------------
Charles Alessi
Secretary
Bordentown, New Jersey
December 28, 1999
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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>
PROXY STATEMENT
OF
FARNSWORTH BANCORP, INC.
789 FARNSWORTH AVENUE
BORDENTOWN, NEW JERSEY 08505
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ANNUAL MEETING OF STOCKHOLDERS
JANUARY 25, 2000
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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 Farnsworth Bancorp, Inc. (the "Company")
to be used at the Annual Meeting of Stockholders of the Company which will be
held at the Days Inn, Route 206, Bordentown, New Jersey on Tuesday, January 25,
2000, at 10:00 a.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 December 28, 1999. The Company is the parent company
of Peoples Savings Bank (the "Bank").
At the Meeting, stockholders will consider and vote upon (i) election
of two directors, (ii) the ratification of the Farnsworth Bancorp, Inc. 1999
Stock Option Plan (the "Stock Option Plan"), and (iii) the ratification of the
Peoples Savings Bank's Restricted Stock Plan (the "Restricted Stock Plan" or the
"RSP"). 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 proxyholder the 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 election of the nominees named
in Proposal I 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 where the nominee is unable to serve, or for good cause
will not serve, matters incident to the conduct of the Meeting, and as to any
other matters that may properly come before the Meeting or any adjournment
thereof.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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Executive officers and directors of the Company have an interest in
certain matters to be acted upon at the Meeting. Upon stockholders ratification
of the Stock Option Plan and the Restricted Stock Plan, the awards under these
plans will vest upon a Change in Control, as defined in the Stock Option Plan
and the Restricted Stock Plan. Such accelerated vesting will be permitted only
if these plans are ratified by stockholders more than one year after the Company
completed its mutual-to-stock conversion. The
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<PAGE>
ratification of the Stock Option Plan and the Restricted Stock Plan are being
presented as Proposal II and Proposal III, respectively.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on December 21, 1999
(the "Record Date"), are entitled to one vote for each share of common stock of
the Company (the "Common Stock") then held. As of the Record Date, the Company
had 379,858 shares of Common Stock outstanding.
The articles of incorporation of the Company (the "Articles of
Incorporation") provide 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 Articles of Incorporation and includes shares
beneficially owned by such person or any of his or her affiliates (as such terms
are defined in the Articles of Incorporation), or which such person or any of
his or her affiliates has the right to acquire upon the exercise of conversion
rights or options and shares as to which such person or any of his or her
affiliates or associates have or share investment or voting power, but neither
any employee stock ownership or similar plan of the Company or any subsidiary,
nor any trustee with respect thereto or any affiliate of such trustee (solely by
reason of such capacity of such trustee), shall be deemed, for purposes of the
Articles of Incorporation, to beneficially own any Common Stock held under any
such plan.
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 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, the proxy card being provided by the
Board of Directors enables a stockholder to vote for the election of the
nominees proposed by the Board of Directors, or to withhold authority to vote
for one or both of the nominees being proposed. Under the Company's bylaws,
directors are elected by a plurality of votes cast, without respect to either
(i) Broker Non-Votes or (ii) proxies as to which authority to vote for the
nominee being proposed is withheld.
As to the ratification of the Stock Option Plan and the RSP, which are
submitted as Proposals II and III, respectively, a stockholder may: (i) vote
"FOR" the ratification; (ii) vote "AGAINST" the ratification; or (iii) "ABSTAIN"
with respect to the ratification. With respect to Proposals II and III, the
affirmative vote of a majority of the votes cast at the Meeting, in person or by
proxy, is required to constitute stockholder ratification without regard to (a)
Broker Non-Votes or (b) proxies marked "ABSTAIN" as to such proposal.
Any other matters that may properly come before the Meeting shall be
determined by a majority of votes cast affirmatively or negatively, unless
otherwise required by law.
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<PAGE>
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PRINCIPAL HOLDERS
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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 following table sets forth, as
of the 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. 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 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>
Craig W. Yates
227 Cliff Avenue
Edgewater Park, New Jersey (1) 28,000 7.37%
Peoples Savings Bank
Employee Stock Ownership Plan (the "ESOP")
789 Farnsworth Avenue,
Bordentown, New Jersey (2) 30,388 8.00%
All directors and officers of the Company
as a group (8 persons) (3) 41,174 10.84%
</TABLE>
_____________________________________
(1) Number of shares is based upon a Schedule 13D filed on February 10, 1999
showing sole voting and dispositive power with respect to 28,000 shares.
(2) 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 ESOP Committee
instructs the ESOP trustees regarding investment of ESOP plan assets. The
ESOP trustee 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
trustee as directed by the ESOP Committee. As of the Record Date, 3,038
shares have been allocated to ESOP participants.
(3) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole voting and investment power,
unless otherwise indicated. Excludes 15,194 shares of Common Stock held by
the Restricted Stock Plan (the "RSP") over which certain directors, as
members of the RSP Committee and as RSP trustees, exercise voting power.
Also excludes 28,918 shares held by the ESOP over which certain directors
as members of the ESOP Committee and ESOP trustees, exercise shared voting
power. Such individuals disclaim beneficial ownership with respect to RSP
and ESOP shares.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of the Common Stock, to file reports of ownership and changes in
ownership of the Common Stock with the Securities and Exchange Commission and to
provide copies of those reports to the Company. The Company is not aware of any
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<PAGE>
beneficial owner, as defined under Section 16(a), of more than ten percent of
its Common Stock. To the best of the Company's knowledge, aside from the late
filing of Forms 5 by the directors and executive officers of the Company to
report stock option grants and awards under the Restricted Stock Plan, all
section 16(a) filing requirements applicable to its officers and directors were
complied with during the 1999 fiscal year.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Articles of Incorporation require that the Board of Directors be
divided into three classes, as nearly equal in number as possible, each class to
serve for a three-year period, with approximately one-third of the directors
elected each year. The Board of Directors currently consists of seven members.
Thus, two directors will be elected at the Meeting to serve for three-year terms
or until their successors have been elected and qualified.
Edgar N. Peppler and Gary N. Pelehaty have both been nominated by the
Board of Directors to serve for a three-year term. Both nominees are currently
members of the Board of Directors. It is intended that proxies solicited by the
Board of Directors will, unless otherwise specified, be voted for the election
of the named nominees. If either of the nominees is unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitutes as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why either of the nominees might be unavailable to
serve.
The following table sets forth the names, ages, terms of, length of
board service and the number and percentage of shares of Common Stock
beneficially owned for both nominees and for each other director of the Company
who will continue to serve as a director after the Meeting. Both nominees are
also directors of the Bank.
<TABLE>
<CAPTION>
Shares of
Age at Year First Current Common Stock Percent
September 30, Elected or Term to Beneficially of
Name 1999 Appointed(1) Expire Owned (2) Class
- ---- -------------- ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2003
Edgar N. Peppler 63 1970 2000 6,000 1.58%
Gary N. Pelehaty 46 1992 2000 5,175 1.36%
DIRECTORS CONTINUING IN OFFICE
Charles E. Adams 84 1985 2001 6,000(3) 1.58%
William H. Wainwright, Jr. 69 1986 2001 6,700 1.76%
George G. Aaronson, Jr. 67 1970 2002 6,000(3) 1.58%
Herman Gutstein 86 1965 2002 6,000 1.58%
G. Edward Koenig, Jr. 58 1981 2002 4,000(3) 1.05%
- ---------------------
</TABLE>
(1) Refers to the year the individual first became a director of the Bank.
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<PAGE>
(2) Beneficial ownership as of December 21, 1999. Includes shares of Common
Stock held directly as well as by spouses or minor children, in trust,
and other indirect ownership, over which shares the individuals
effectively exercise sole or shared voting and investment power, unless
otherwise indicated.
(3) Excludes 30,388 shares of Common Stock held under the ESOP over which
such individual, as a member of the ESOP Committee and as an ESOP
Trustee, exercises shared voting power. Also excludes 15,194 shares of
Common Stock held by the RSP over which such individual, as a member of
the RSP Committee and as an RSP trustee, exercises voting power. Such
individual disclaims beneficial ownership with respect to ESOP and RSP
shares.
The principal occupation of, and other information about, each director
and executive officer of the Company is set forth below as of September 30,
1999. All directors and executive officers have held their present positions for
five years unless otherwise stated.
EdgarN. Peppler has been a director of the Bank since 1970. He has
served as vice-chairman of the board since 1992. Mr. Peppler is part owner and
President of Peppler Funeral Home, a business he has been associated with since
1957. Mr. Peppler is a member of the Bordentown Chamber of Commerce, a past
president of the Bordentown Kiwanis Club, and a past master of the Masonic
Lodge.
Gary N. Pelehaty has served the Bank as a director since October 1992.
He has also been President and Chief Executive Officer of the Bank since
February of the same year. Mr. Pelehaty is a director of First Nations Financial
Services Company. Active in the local community, Mr. Pelehaty is a member of the
Bordentown Rotary, a director of the Burlington County Burn Foundation, and the
finance chairman of Bordentown Veterans' Memorial Foundation. He is also a
former director of Bordentown's Chamber of Commerce and President of the
Burlington/Camden Savings League.
Charles E. Adams has been a director of the Bank since 1985. Mr. Adams
is now retired, but was the Administrator and Secretary of Florence Township
Saving and Loan Association for 20 years. Mr. Adams is on the administrative
board of Florence United Methodist Church, and is treasurer of the Florence
Historical Society.
William H. Wainwright, Jr. has been a director of the Bank since 1968.
Before retiring in 1995, he was employed for 20 years as a loan officer at the
Farmers Home Administration and the Small Business Administration. Mr.
Wainwright is a member of the Surf City Yacht Club and served as their Commodore
in 1996.
George G. Aaronson, Jr. has been a director of the Bank since 1970. He
is employed by Falconer & Bell as a real estate sales agent.
Herman Gutstein has been a director of the Bank since 1965. He has also
served as chairman of the board since 1992. Mr. Gutstein is retired. He formerly
owned a convenience store.
G. Edward Koenig, Jr. has, except for a three year hiatus ending in
1993, been a director since 1981. Mr. Koenig is President of E. J. Koenig Inc.,
a fuel service petroleum products company and a heating and air conditioning
equipment sales, installation and service business. Mr. Koenig sits on the
Burlington County Military Affairs Committee Executive Board and served as its
chairman from 1996 to 1997.
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<PAGE>
Charles Alessi, age 37, has been employed by the Bank since 1992 and is
Vice-President and the Chief Financial Officer. He is also Secretary and
Treasurer of the Bank. Mr. Alessi is a member of the Financial Managers Society.
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through the meetings of
the Board and through activities of its committees. All committees act for both
the Company and the Bank. During the fiscal year ended September 30, 1999, the
Board of Directors held 23 regular meetings and 4 special meetings. No director
attended fewer than 75% of the total meetings of the Boards of Directors and
committees during the period of his service. In addition to other committees, as
of September 30, 1999, the Board had a Nominating Committee, an Audit Committee
and a Compensation and Benefits Committee.
The Company's full Board of Directors acts as a nominating committee
("Nominating Committee") for selecting the management's nominees for election of
directors in accordance with the Company's Bylaws. Nomination to the Board of
Directors made by stockholders must be made in writing to the Secretary of the
Company and received by the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company. Notice to the Company of such nominations must include certain
information required pursuant to the Company's Bylaws. This non-standing
committee met [once] during the 1999 fiscal year.
The Company does not have a standing Audit Committee. The entire Board
of Directors regularly reviews the financial statements of the Company. In
addition, the Board of Directors of the Bank meets annually with the Company's
independent accountants to review audit matters. The Board of Directors of the
Bank met once during the 1999 fiscal year with the independent accountants for
this purpose.
The Compensation and Benefits Committee is comprised of non-employee
Directors Adams, Aaronson and Koenig. This standing committee establishes the
Bank's salary budget, director and committee member fees, and employee benefits
provided by the Bank for approval by the Board of Directors. The Committee met
[once] during the 1999 fiscal year.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
Directors of the Company are also directors of the Bank. Since October
1, 1998, each director (including the chairman of the board) has been paid a
monthly fee of $500 plus $100 per meeting attended. Total aggregate fees paid to
the directors for the year ended September 30, 1999 were $59,800.
Stock Awards. Each director has been awarded 1,899 options to purchase
shares of Common Stock at $10.625 per shares under the Stock Option Plan and 759
shares of Common Stock under the Restricted Stock Plan. Ratification of these
plans is being presented as Proposal II and Proposal III.
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<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the chief executive officer. No
other executive officer had a salary and bonus that exceeded $100,000 for
services rendered for the fiscal years ended September 30, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------------- -------------------------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Award(2) Options (3) Compensation
- ------------------ ---- ------ ----- --------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary N. Pelehaty, 1999 $96,611 $10,000 $6,000 $40,354 9,496 $12,784(4)
President, CEO 1998 $98,912 $ - $6,000 $ -- -- $ 2,946(5)
and Director 1997 $88,150 $ - $4,800 $ -- -- $ 7,544(5)
</TABLE>
- ----------------------------
(1) Consists of Board fees. Mr. Pelehaty also receives an automobile allowance.
(2) Represents the award of 3,798 shares of Common Stock under the RSP based
upon the last reported sales price for the Common Stock as reported on the
OTC Bulletin Board on April 6, 1999, the date of the award. This award
vests at the rate of 20% per year, beginning on the first anniversary of
the date of the grant. Dividend right associated with the restricted stock
are accrued and held in arrears to be paid at the time the shares vest.
(3) Represents the award of 9,496 options at the exercise price of $10.625,
equal to the last reported sales price for the Common Stock as reported on
the OTC Bulletin Board on April 6, 1999, the date of the award.
(4) Represents the award of 953 shares under the ESOP as of June 30, 1999 based
upon the last reported sales price of the Common Stock on the date of the
award, plus $2,896 for a 401(k) plan matching contribution.
(5) Consists of 401(k) plan matching contributions.
Stock Awards. The following tables set forth information concerning
options granted to Mr. Pelehaty during the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
- ------------------------------------------------------------------------------------------------------------------
Individual Grants
---------------------------------------------------------------------------------
Percent of Total
Options Granted
Number of to Employees Exercise Price Expiration
Name Options Granted in Fiscal Year ($/Share) Date
- ---- --------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Gary N. Pelehaty 9,496 62.50% $10.625 4/6/09
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value of
Number of Options In the-Money Options
Shares Acquired Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Name on Exercise(#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ------------- ------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Gary N. Pelehaty -- $ -- 0 / 9,496 $0 / $0
</TABLE>
- --------------------
(1) Based upon the difference between the option exercise price of $10.625
and the last reported sales price of the Common Stock of $9.00 per
share as of September 30, 1999, as reported on the OTC Bulletin Board.
-7-
<PAGE>
Employment Agreement. The Bank has entered into an employment agreement
(the "Agreement") with Gary Pelehaty for a three year term. Mr. Pelehaty's base
compensation under the Agreement is $90,000. Under the Agreement, Mr. Pelehaty's
employment may be terminated by the Bank for "just cause" as defined in the
Agreement. If the Bank terminates Mr. Gary Pelehaty 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. In the event of the termination of
employment in connection with any change in control of the Bank during the term
of the Agreement, Mr. Pelehaty will be paid in a lump sum an amount equal to
2.99 times his prior five year's average taxable compensation. In the event of a
change in control at September 30, 1999, Mr. Pelehaty would have been entitled
to a lump sum payment of approximately $270,000.
Benefits
The 1999 Stock Option Plan. The Board of Directors of the Company has
adopted the Stock Option Plan for the benefit of its Directors, officers, and
key employees. The Stock Option Plan was approved by the stockholders on April
6, 1999. Ratification of this plan is being presented as Proposal II.
The Restricted Stock Plan. The Board of Directors of the Company has
adopted a restricted stock program for the benefit of personnel of experience
and ability in key positions of responsibility with the Bank. The RSP was
approved by the stockholders on April 6, 1999. Ratification of this plan is
being presented as Proposal III.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Certain Related Transactions
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, 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, or present other unfavorable
features.
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PROPOSAL II - RATIFICATION OF THE STOCK OPTION PLAN
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General
The Board of Directors adopted the Stock Option Plan and the Company's
stockholders approved it on April 6, 1999 ("Effective Date"). There have been no
changes made to the Stock Option Plan since it was originally adopted by the
Board of Directors and approved by stockholders of the Company on April 6, 1999.
The only reason the Stock Option Plan is being resubmitted to stockholders of
the Company for ratification at this time is to comply with OTS interpretive
letters, as discussed below.
Pursuant to the Stock Option Plan, up to 37,985 shares of Common Stock
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 Stock Option Plan is to attract and retain qualified
-8-
<PAGE>
personnel for positions of substantial responsibility and to provide additional
incentive to certain officers, directors, key employees and other persons to
promote the success of the business of the Company and the Bank.
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 Stock Option Plan contains
certain restrictions and limitations. The Stock Option Plan provides 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 term is defined in the Stock Option
Plan); provided, however, that such accelerated vesting is not inconsistent with
the regulations of the OTS at the time of such acceleration. Recent OTS
interpretive letters permit awards under stock benefit plans to accelerate
vesting of awards upon a Change in Control; provided that stockholders ratify
such plan provisions by action of stockholders taken more than one year
following the completion of the mutual-to-stock conversion. The Board of
Directors is seeking ratification of the Stock Option Plan (as previously
approved by the stockholders on April 6, 1999) as a means of complying with the
OTS interpretive letters.
Ratification of the Stock Option Plan does not increase the number of
shares reserved for issuance thereunder, alter the classes of individuals
eligible to participate in the Stock Option Plan, or otherwise amend or modify
the terms of the Stock Option Plan. In the event that the Stock Option Plan is
not ratified by stockholders at the Meeting, the Stock Option Plan will
nevertheless remain in effect. However, any employee or director of the Company
or the Bank that has their service terminated prior to the vesting of such stock
awards may forfeit such unvested awards to the extent that may be required under
applicable OTS regulations and policies.
The Stock 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 will be eligible to receive, at no cost to them, options
under the Stock Option Plan (the "Optionees"). Each option granted pursuant to
the Stock 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
Stock 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.
-9-
<PAGE>
Shares of Common Stock issuable under the Stock Option Plan may be from
authorized but unissued shares, treasury 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
Stock 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 Stock
Option Plan shall continue in effect for a term of ten years from the Effective
Date.
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 Stock 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 Stock Option Plan); provided,
however, that such accelerated vesting is not inconsistent with the regulations
of the OTS at the time of such acceleration. Ratification of the Stock Option
Plan at the Meeting will conform the acceleration of vesting of options upon a
Change in Control with applicable OTS interpretive letters. Such stockholder
ratification will be effective with respect to previously awarded options and
any options that may be granted in the future. Pursuant to the Stock Option
Plan, upon a Change in Control, all options previously granted and 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 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. Any cash payment
shall be in exchange for the cancellation of such option. A 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.
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<PAGE>
The Stock 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 Stock Option Plan.
Awards Under the Stock 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
options under the Plan, the number of options to be granted to any participant,
and whether options granted to each such Plan participant 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 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 option
may, if otherwise eligible, be granted additional options. In no event shall
shares of Common Stock subject to options granted to non-employee directors in
the aggregate under this Stock Option Plan exceed more than 30% of the total
number of shares of Common Stock authorized for delivery under this Plan, and no
more than 5% of total shares of Common Stock may be awarded to any individual
non-employee director. In no event shall shares of Common Stock subject to
options granted to any employee exceed more than 25% of the total number of
shares of Common Stock authorized for delivery under the Stock Option Plan.
The table below presents information related to options previously
awarded by the Company under the Stock Option Plan. Ratification of the Stock
Option Plan does not impact the number of options previously awarded.
Stockholder ratification of the Stock Option Plan confirms the provisions of the
Stock Option Plan previously approved by stockholders of the Company. In
accordance with the Stock Option Plan, all outstanding options shall become
immediately exercisable in the event of a Change in Control of the Company or
the Bank.
PREVIOUSLY AWARDED BENEFITS
UNDER THE STOCK OPTION PLAN
---------------------------
Number of Options
Name and Position Previously Granted(1)(2)
- ----------------- ------------------------
Gary N. Pelehaty, President, CEO and Director (3) 9,496
Edgar N. Peppler, Director (3) 1,899
Executive Officer Group (2 persons) 15,193
Non-Executive Officer Director Group
(6 persons) 11,394
Non-Executive Officer Employee Group
(12 persons) 0
- ----------------
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<PAGE>
(1) The exercise price of such options is $10.625, the fair market value of
the Common Stock on April 6, 1999, the date of grant. The exact dollar
value of the options will equal the market price of the Common Stock on
the date the option is exercised less the exercise price.
(2) Options shall vest, on the one year anniversary of the date of grant,
20% annually during periods of continued service as an employee,
director, or director emeritus. Upon vesting, options shall remain
exercisable for ten years from the date of grant without regard to
continued service as an employee, director, or director emeritus. Such
awards shall be 100% exercisable in the event of death, disability, or
upon a change in control of the Company or the Bank. Options not
exercised within three months of termination of service as an employee
shall thereafter be deemed non-incentive stock options.
(3) Nominee for election as a director.
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 Stock 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 Stock Option Plan to fail to meet the requirements of Section 422 of the
Code without the consent of the Optionee. The Stock Option Plan provision 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 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 Stock 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 Stock Option Plan to operate in changed
circumstances, to adjust the Stock 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 also
has an anti-takeover effect, by allowing the Option Committee to adjust the
Stock Option Plan in a manner to allow the present management of the Company to
exercise more options and hold more
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<PAGE>
shares of the Company's Common Stock, and to
possibly decrease the number of options available to new management of the
Company.
Amendment and Termination of the Stock Option Plan
The Board of Directors may alter, suspend or discontinue the Stock
Option Plan, except that no action of the Board shall increase the maximum
number of shares of Common Stock issuable under the Stock Option Plan,
materially increase the benefits accruing to Optionees under the Stock Option
Plan or materially modify the requirements for eligibility for participation in
the Stock Option Plan unless such action of the Board shall be subject to
approval or ratification by the stockholders of the Company.
Possible Dilutive Effects of the Stock Option Plan
The Common Stock to be issued upon the exercise of options awarded
under the Stock 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 Stock 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., 37,985 shares of Common Stock), then the dilutive effect to current
stockholders would be approximately 9.1%. Ratification of the Stock Option Plan
does not increase the maximum number of shares issuable under the Stock Option
---
Plan as previously approved by stockholders.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Stock 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
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<PAGE>
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 Stock 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
The Company expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25. Accordingly, neither the grant nor the exercise of
an option under the Stock Option Plan currently require any charge against
earnings under generally accepted accounting principles. Common Stock issuable
pursuant to outstanding options which are exercisable under the Stock Option
Plan will be considered outstanding for purposes of calculating earnings per
share on a diluted basis.
Stockholder Ratification
Stockholder ratification of the Stock Option Plan is being sought 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 the Stock Option Plan,
submitted as Proposal II.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
-----
RATIFICATION OF THE STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE RESTRICTED STOCK PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company previously adopted the RSP 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. There have been no
changes made to the RSP since it was originally adopted by the Board of
Directors and approved by stockholders of the Company on April 6, 1999. The only
reason the RSP is being resubmitted to stockholders of the Company for
ratification at this time is to comply with OTS interpretive letters, as
discussed below.
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<PAGE>
As previously approved by stockholders of the Company on April 6, 1999,
the Bank contributed sufficient funds to the RSP to purchase Common Stock
representing up to 4% of the aggregate number of shares issued in the Conversion
(i.e., 15,194 shares of Common Stock) in the open market. All of the Common
Stock purchased by the RSP was purchased at the fair market value of such stock
on the date of purchase. Awards under the RSP were made in recognition of
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 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 RSP contains certain
restrictions and limitations. The RSP provides that stock awards ("Awards")
granted to employees or directors become vested no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change
in Control, as such term is defined in the RSP); provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Recent OTS interpretive letters permit awards under
stock benefit plans to accelerate vesting of awards upon a Change in Control;
provided that stockholders ratify such plan provisions by action of stockholders
taken more than one year following the completion of the mutual-to-stock
conversion. The Board of Directors is seeking ratification of the RSP (as
previously approved by the stockholders on April 6, 1999) as a means of
complying with the OTS interpretive letters.
Ratification of the RSP does not increase the number of shares reserved
for issuance thereunder, alter the classes of individuals eligible to
participate in the RSP, or otherwise amend or modify the terms of the RSP. In
the event that the RSP is not ratified by stockholders at the Meeting, the RSP
will nevertheless remain in effect. However, any employee or director of the
Company or the Bank that has their service terminated prior to the vesting of
such stock awards may forfeit such unvested awards to the extent that may be
required under applicable OTS regulations and policies.
Awards Under the RSP
Currently, the RSP requires that Awards granted to employees or
directors become first exercisable no more rapidly than ratably over a five-year
period (with accelerated vesting upon death or disability or a Change in
Control, as such terms are defined in the RSP); provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Ratification of the RSP at the Meeting will conform
the acceleration of vesting of Awards upon a Change in Control with applicable
OTS interpretive letters. Such stockholder ratification will be effective with
respect to previously granted Awards and any Awards that may be granted in the
future. Pursuant to the RSP, upon a Change in Control, all Awards previously
granted and outstanding as of the date of a Change in Control will automatically
become exercisable and non-forfeitable.
Benefits under the RSP ("Plan Share Awards") may be granted at the sole
discretion of a committee comprised of not less than three directors who are not
employees of the Bank or the Company (the "RSP Committee") appointed by the
Bank's Board of Directors. The RSP is managed by trustees (the "RSP 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 RSP (the "RSP Trust"). Unless the terms of the RSP or the RSP Committee
specifies otherwise, awards under the RSP will be in
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<PAGE>
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 RSP Trust which
are not yet earned shall be voted by the RSP Trustees, as directed by the RSP
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
(provided that such accelerated vesting is not inconsistent with applicable
regulations of the OTS at the time of such change in control), all restrictions
expire and all shares allocated shall become unrestricted. Awards of restricted
stock to directors shall be immediately non-forfeitable in the event of the
death or disability of such director, or a change in control of the Company or
the Bank and distributed as soon as practicable thereafter. The Board of
Directors can terminate the RSP at any time, and if it does so, any shares not
allocated will revert to the Company.
Plan Share Awards under the RSP will be determined by the RSP
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 RSP) 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 RSP) of the RSP 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 RSP as authorized pursuant to the terms
of the RSP. Ratification of such RSP does not change the number of shares
awarded or other terms. Such ratification of the RSP confirms the provisions of
the RSP previously approved by the stockholders of the Company.
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<PAGE>
PRIOR AWARDS UNDER THE RSP
--------------------------
Number of Shares
Name and Position Previously Granted (1)(2)
- ----------------- --------------------------
Gary N. Pelehaty, President, CEO and Director (3) 3,798
Edgar N. Peppler, Director (3) 759
Executive Officer Group (2 persons) 6,077
Non-Executive Officer Director Group (6 persons) 4,554
Non-Executive Officer Employee Group (12 persons) 0
- --------------------
(1) The exact dollar value of the shares of Common Stock granted will equal
the market price of the Common Stock on the date of vesting of such
awards. Accordingly, the exact dollar value is not presently
determinable.
(2) All Plan Share Awards presented herein shall be earned at the rate of
20% one year from date of grant, and 20% annually thereafter. All
awards become immediately 100% vested upon death, disability, or
termination of service following a change in control (as defined in the
RSP). Plan Share Awards shall continue to vest during periods of
service as an employee, director, or director emeritus.
(3) Nominee for election as a director.
Amendment and Termination of the RSP
The Board may amend or terminate the RSP at any time. However, no
action of the Board may increase the maximum number of Plan Shares permitted to
be awarded under the RSP, except for adjustments in the Common Stock of the
Company, materially increase the benefits accruing to Participants under the RSP
or materially modify the requirements for eligibility for participation in the
RSP unless such action of the Board shall be subject to ratification by the
stockholders of the Company.
Possible Dilutive Effect of the RSP
In the event that the RSP is not ratified at the Meeting, the RSP will
nevertheless remain in effect. Because shares for awards under the RSP have
already been purchased in the market, current shareholders will suffer no
ownership dilution. However, in the event the RSP is ratified and a change in
control of the Company occurs prior to the time that shares that have been
awarded pursuant to the RSP would otherwise vest, the aggregate purchase price
received by stockholders could be effectively reduced by the value of shares
that vest solely because of the change in control. The Company currently has no
plan in place that will result in a change in control.
Federal Income Tax Consequences
Common Stock awarded under the RSP is generally taxable to the
recipient at the time that such awards become earned 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 transfer of such Plan Share Award to
elect to include in gross income for the current taxable year the fair market
value of such award. Such election must be filed with the Internal Revenue
Service within 30 days of the date of the transfer 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
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<PAGE>
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 RSP Trust in order to meet any necessary tax
withholding obligations.
Accounting Treatment
For accounting purposes, the Company will recognize compensation
expense in the amount of the fair market value of the Common Stock subject to
Plan Share Awards at the grant date pro rata over the period of years during
which the awards are earned.
Stockholder Ratification
The Company is submitting the RSP to stockholders for ratification 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 the RSP, submitted as
Proposal III.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE RSP.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy
materials for the annual meeting of stockholders for the fiscal year ending
September 30, 2000, all stockholder proposals must be received at the Company's
executive office at 789 Farnsworth Avenue, Bordentown, New Jersey 08505 no later
than August 31, 2000. In addition, stockholder proposals must meet other
applicable criteria as set forth in the Company's bylaws in order to be
considered for inclusion in the Company's proxy materials.
Under the Company's bylaws, stockholder proposals that are not included
in the Company's proxy statement for the fiscal year ending September 30, 2000,
will only be considered at the annual meeting to be held in 2001 if the
stockholder submits notice of the proposal to the Company at the above address
by November 26, 2000. In addition, stockholder proposals must meet other
applicable criteria as set forth in the Company's bylaws in order to be
considered at the 2001 annual meeting.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any other matters to come before
the Meeting. However, if any other matters should properly come before the
Meeting or any adjournments, 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.
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<PAGE>
- --------------------------------------------------------------------------------
FORM 10-KSB
- --------------------------------------------------------------------------------
A copy of the Company's annual report on Form 10-KSB for the fiscal
year ended September 30, 1999 will be furnished without charge to stockholders
as of the Record Date upon written request to the Secretary, Farnsworth Bancorp,
Inc., 789 Farnsworth Avenue, Bordentown, New Jersey 08505.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles Alessi
---------------------------------------------
Charles Alessi
Secretary
Bordentown, New Jersey
December 28, 1999
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FARNSWORTH BANCORP, INC.
789 FARNSWORTH AVENUE
BORDENTOWN, NEW JERSEY 08505
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ANNUAL MEETING OF STOCKHOLDERS
JANUARY 25, 2000
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The undersigned hereby appoints the Board of Directors of Farnsworth
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 Annual Meeting of Stockholders (the "Meeting"), to be held at the Days
Inn, Route 206, Bordentown, New Jersey on Tuesday, January 25, 2000, at 10:00
a.m. and at any and all adjournments thereof, in the following manner:
FOR WITHHELD
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1. The election as director of the nominees
listed with terms to expire in 2003
(except as marked to the contrary below): ~ ~
Edgar N. Peppler
Gary N. Pelehaty
INSTRUCTIONS: To withhold your vote for either nominee, write the nominee's name
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on the line provided below.
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FOR AGAINST ABSTAIN
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2. The ratification of the
Farnsworth Bancorp, Inc.
1999 Stock Option Plan. ~ ~ ~
3. The ratification of the
Peoples Savings Bank
Restricted Stock Plan. ~ ~ ~
The Board of Directors recommends a vote "FOR" all of the above listed
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proposals.
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.
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THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF
ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS SIGNED PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect 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 December 28, 1999 and the 1999 Annual Report to Stockholders.
Dated: -----------------------------
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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PRINT NAME OF STOCKHOLDER PRINT NAME 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.
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PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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