<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
KEYSTONE FINANCIAL
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
LOGO
KEYSTONE FINANCIAL
April 9, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Keystone Financial, Inc., to be held on Thursday, May 21, 1998 at 10:00 a.m.,
local time, at the Harrisburg Hilton Hotel, Market Square, Harrisburg,
Pennsylvania. A Notice and Proxy Statement for the meeting follow, and a proxy
card and return envelope are enclosed. Your Corporation's 1997 Annual Report
is also enclosed.
At this meeting the Executive Management of Keystone will review the results
of your Corporation for 1997 and comment on plans and strategies for the
current year and the future. The agenda for the annual meeting includes
election of directors and the ratification of the appointment of independent
auditors.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSALS INCLUDED IN THE PROXY
STATEMENT ARE IN THE BEST INTEREST OF ALL SHAREHOLDERS AND RECOMMENDS A VOTE
"FOR" THESE PROPOSALS.
Your participation as a shareholder in the affairs of the Corporation is
encouraged. It is important that your stock be represented at the Meeting,
whether or not you are personally able to be present. Accordingly, PLEASE
PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED FOR YOUR CONVENIENCE. You are urged to do so even if you
plan to attend the meeting. Your prompt cooperation and support will be
greatly appreciated.
The business and presentation portions of the meeting should last
approximately forty minutes. I, as well as the other Executive Officers of the
Corporation, will be available both before and after the meeting to answer any
questions you may wish to ask. I hope that you will be able to attend this
year's meeting and look forward to seeing you there.
Sincerely,
/s/ Carl L. Campbell
Carl L. Campbell
President and Chief
Executive Officer
<PAGE>
LOGO
KEYSTONE FINANCIAL
ONE KEYSTONE PLAZA
FRONT AND MARKET STREETS
P.O. BOX 3660
HARRISBURG, PENNSYLVANIA 17105-3660
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1998
------------
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of Keystone
Financial, Inc. will be held on Thursday, May 21, 1998 at 10:00 a.m., local
time, at the Harrisburg Hilton Hotel, Market Square, Harrisburg, Pennsylvania,
for the purpose of considering and acting upon the following:
1. The election of one director to serve for a term expiring in 2000 and
six directors to serve for terms expiring in 2001;
2. The ratification of the appointment of Ernst & Young LLP as the
independent auditors for the Corporation for 1998;
3. Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on April 2, 1998 are
entitled to notice of and to vote at the Annual Meeting.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote your
shares in person.
By Order of the Board of Directors
/s/ Ben G. Rooke
Ben G. Rooke, Secretary
<PAGE>
LOGO
KEYSTONE FINANCIAL
ONE KEYSTONE PLAZA
FRONT AND MARKET STREETS
POST OFFICE BOX 3660
HARRISBURG, PA 17105-3660
------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS--MAY 21, 1998
------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Keystone Financial, Inc. (the "Corporation") of proxies
to be voted at the 1998 Annual Meeting of Shareholders of the Corporation
which will be held at 10:00 a.m., local time, on Thursday, May 21, 1998, at
the Harrisburg Hilton Hotel, Market Square, Harrisburg, Pennsylvania, and at
any adjournment thereof. The approximate date on which this Proxy Statement
will first be mailed to the shareholders is April 9, 1998.
All properly executed proxies not previously revoked will be voted at the
Annual Meeting as specified thereon. If no specification is made, proxies will
be voted in favor of the election as directors of the nominees named below and
in favor of the ratification of the appointment of Ernst & Young LLP as
independent auditors for the Corporation for 1998. A proxy may be revoked at
any time before it is voted by written notice to the Secretary of the
Corporation, or by attending the meeting and voting in person.
The Board of Directors has fixed the close of business on April 2, 1998 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting. At that date, approximately 51,652,186 shares of
Common Stock, par value $2.00 per share ("Common Stock"), were issued and
outstanding. On April 2, 1998, there were approximately 15,719 shareholders of
record. Each share entitles its holder of record at the close of business on
the record date to one vote on each matter properly submitted to the
shareholders for action at the Annual Meeting. The Restated Articles do not
permit cumulative voting.
As of April 2, 1998, the trust departments of the Corporation's bank
subsidiaries and the Corporation's trust company subsidiaries, acting in a
fiduciary capacity for various trusts and estates, held an aggregate of
3,605,059 shares of Common Stock (approximately 6.98% of the outstanding
shares). Of these shares, the banks and trust companies have sole voting power
over 730,610 shares, share voting power with other persons over 312,553
shares, have sole investment power over 2,465,736 shares and share investment
power with other persons over 215,835 shares.
PROPOSALS FOR SHAREHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six directors will be elected at the Annual Meeting to serve for terms
expiring at the Annual Meeting in 2001. In addition, one director will be
elected to serve for a term expiring at the Annual Meeting in 2000. By a vote
of the Board of Directors, the size of the Board was fixed at 20 members. Each
director elected will continue in office until a successor has been elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE SEVEN NOMINEES LISTED BELOW. Each nominee has consented to be
named as a nominee and to serve if elected. If for any reason any nominee
named is not a candidate (which is not expected) when the election occurs,
proxies will be voted for a substitute nominee determined by the Board of
Directors (the "Board").
<PAGE>
The following table sets forth certain information about the nominees, each
of whom, other than Ms. Shepard and Mr. Scheiner, are presently members of the
Board, and about the other directors whose terms of office will continue after
the Annual Meeting./1/
<TABLE>
<CAPTION>
SHARES PERCENT OF
YEAR FIRST BENEFICIALLY COMMON
NAME, PRINCIPAL OCCUPATIONS BECAME OWNED AS OF STOCK
DURING THE PAST FIVE YEARS, AGE DIRECTOR APRIL 1, 1998(1) OUTSTANDING
------------------------------- ---------- ---------------- -----------
<S> <C> <C> <C>
Nominee for Director with term
expiring in 2000:
Molly Dickinson Shepard; Chairman
and Co-Founder of Manchester, Inc.
(outplacement and human resources
consulting firm); Age 51(5)....... -- 2,091 .004
Nominees for Directors with terms
expiring in 2001:
Carl L. Campbell; President and
Chief Executive Officer
of the Corporation; Age 55........ 1986 423,005(2)(3)(4) .81
Paul I. Detwiler, Jr.; Chairman of
the Board of New Enterprise Stone
and Lime Co., Inc. (construction
aggregates); Age 64............... 1988 22,286(2) .04
Allan W. Holman, Jr.; Senior
Partner, Holman & Holman
(attorneys-at-law); Age 68........ 1997 14,879(2) .03
James I. Scheiner; President &
Principal-In-Charge, Benetec
Associates, Inc. (engineering,
architectural & environmental
services firm); Director, Harsco
Corporation; Age 53............... -- 1,060 .002
Ronald C. Unterberger; Attorney-
at-Law, Partner, Harper & Driver
(attorneys-at-law); Age 62........ 1994 18,992 .04
G. William Ward; Chairman of the
Board of Ward Trucking Corp.; Age
66................................ 1984 49,120(2) .10
Continuing Directors with terms
expiring in 2000:
June B. Barry; Vice President,
Human Resources and
Administration, of Betz Dearborn,
Inc. (chemical products); Age 46.. 1996 192 .0004
Gerald E. Field; President of
Weiner Iron and Metal Corp.; Age
63................................ 1986 91,003 .18
Philip C. Herr, II; Partner, Herr,
Potts & Herr (attorneys-at-law);
Age 61............................ 1994 234,981(2) .45
William L. Miller; President and a
Director of Ebinger Iron Works,
Inc. (steel fabricator); Age 49... 1986 26,836(2) .05
Mark L. Pulaski; Vice Chairman and
Chief Operating Officer of the
Corporation; Age 44(6)............ 1997 137,804(2)(4) .27
Ray L. Wolfe; Chairman of the
Board of the Corporation and
Chairman, President and Chief
Executive Officer of Financial
Trust Company; Age 59(7).......... 1997 83,253(2)(4) .16
Continuing Directors with Terms
Expiring in 1999:
A. Joseph Antanavage; Partner,
Bear, Antanavage & Moyer
(attorneys-at-law); Partner, North
Berks Abstract (title insurance
agency); Age 51................... 1986 29,166(2) .06
</TABLE>
- --------
/1/The Honorable J. Glenn Beall, Jr. and Walter W. Grant will be retiring as
members of the Board of Directors on the day of the Annual Meeting.
2
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT OF
YEAR FIRST BENEFICIALLY COMMON
NAME, PRINCIPAL OCCUPATIONS BECAME OWNED AS OF STOCK
DURING THE PAST FIVE YEARS, AGE DIRECTOR APRIL 1, 1998(1) OUTSTANDING
------------------------------- ---------- ---------------- -----------
<S> <C> <C> <C>
Donald Devorris; President of Blair
Electric Service Co. (electrical
construction); President of Blair Sign
Co., Inc. (sign manufacturing);
President of Blair Design &
Construction Co. (general
construction); President of Electrical
Construction Service, Inc. (electrical
construction); Age 63.................. 1984 105,706(2) .20
Richard G. King; President, Chief
Operating Officer and
Director of Utz Quality Foods, Inc.
(salted snacks); Age 53................ 1997 9,428 .02
Uzal H. Martz, Jr.; President,
Publisher and Treasurer of J. H. Zerbey
Newspapers, Inc. and President of its
subsidiary corporations, WMBT
Broadcasting, Inc., WQIN Broadcasting,
Inc., Shenandoah Evening Herald
Publishing Company, Inc. and Hazelton
Easy to Read Telephone Directory, Inc.;
Age 63................................. 1986 36,118(2) .07
Max A. Messenger; Chairman of Wood
Products, Inc. (hardwood lumber & dry
kilns), Chairman of Global Hardwood,
Inc. (residential construction),
General Partner of Messenger Limited
Partnership (land holding company); Age
62..................................... 1994 24,511 .05
Don A. Rosini; President of Shamokin
Filler Co., Inc. (manufacturer of
carbon additives and specialty cements
and grouts); Age 59.................... 1986 44,620(3) .09
F. Dale Schoeneman; President of
Schoeneman Beauty Supply, Inc.
(wholesale distributor); Age 56........ 1986 24,953 .05
All nominees, directors and executive
officers as a group
(23 persons)........................... 1,643,091(4) 3.14
</TABLE>
- --------
(1) Unless otherwise indicated in the other footnotes below, each director or
nominee has sole voting power and sole investment power over the shares
indicated opposite his or her name in the table, and a member of the group
has sole voting power and sole investment power over the shares indicated
for the group. The number of shares includes the following shares which
each director or nominee, except for Ms. Barry, Mr. Campbell, Mr.
Messenger, Mr. Pulaski, Mr. Scheiner and Ms. Shepard, has the right to
acquire through currently exercisable stock options under the
Corporation's 1995 and 1990 Non-Employee Directors' Stock Option Plans or
the stock option plans of previously acquired companies: Mr. Antanavage,
15,410 shares; Mr. Detwiler and Mr. Schoeneman, 14,060 shares; Mr. Herr
5,624 shares; Mr. Holman, 4,261 shares; Mr. King, 2,178 shares; Mr.
Unterberger, 8,954 shares; and each remaining director, 16,872 shares.
(2) Includes the following shares as to which voting and investment power is
shared with the spouse: Mr. Antanavage, 7,107 shares; Mr. Campbell, 23,009
shares; Mr. Detwiler, 5,625 shares; Mr. Devorris, 7,842 shares; Mr. Herr,
2,770 shares; Mr. Holman, 7,252 shares; Mr. Martz, 11,784 shares; Mr.
Miller, 2,648 shares; Mr. Pulaski, 16,538 shares; Mr. Ward, 421 shares;
and Mr. Wolfe, 5,649 shares.
(3) Includes the following shares held by spouses and/or children as to which
beneficial ownership is disclaimed: Mr. Campbell, 17,421 shares; Mr.
Rosini, 4,489 shares.
(4) Includes the following shares which executive officers have the right to
acquire through stock options: Mr. Campbell, 334,282 shares; Mr. Pulaski,
92,338 shares; and Mr. Wolfe, 5,754 shares; and all other executive
officers as a group, 90,149 shares. Also includes the following shares
held in 401(k) plan accounts, as to which the executive officers have
voting power only: Mr. Campbell, 3,894 shares; Mr. Pulaski, 3,392 shares;
Mr. Wolfe, 123 shares; and all other executive officers as a group, 6,608
shares. Also includes shares beneficially owned by Mr. Beall and Mr. Grant
as follows: Mr. Beall 31,984 shares; and Mr. Grant 108,830 shares.
3
<PAGE>
(5) Prior to October 1997, Ms. Shepard was President, Chief Operating Officer
& Co-Founder of Manchester, Inc.
(6) From 1995 to November 1997, Mr. Pulaski was Senior Executive Vice
President, Chief Financial Officer ("CFO") and Chief Administrative
Officer ("CAO") of the Corporation; and prior to 1995 he served as
Executive Vice President, CFO and CAO of the Corporation.
(7) Prior to May 30, 1997, Mr. Wolfe was Chairman and Chief Executive Officer
of Financial Trust Corp, which was acquired by the Corporation on that
date.
Additional information concerning the nominees and the other members of the
Board is set forth below under the caption "Other Information Concerning
Directors and Executive Officers."
VOTE REQUIRED
There will be separate elections at the Annual Meeting for the election of
six directors for terms expiring in 2001 and for the election of one director
for a term expiring in 2000. In the election for terms expiring in 2001, the
six candidates receiving the highest numbers of votes cast by the holders of
Common Stock voting in person or by proxy will be elected. In the election for
a term expiring in 2000, the candidate who receives the highest number of
votes cast by the holders of Common Stock voting in person or by proxy will be
elected. A proxy vote indicated as withheld from a nominee will not be cast
for such nominee but will be counted in determining whether a quorum exists
for the meeting. The Corporation's Restated Articles do not permit cumulative
voting in the election of directors.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors has appointed the firm of Ernst & Young LLP as independent auditors
for the Corporation for 1998.
Although the appointment of independent auditors is not required to be
approved by the shareholders, the Board of Directors believes the shareholders
should participate in the selection of independent auditors through the
ratification process. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP. A vote of the
shareholders not to ratify the appointment of Ernst & Young LLP will be
considered as a direction to the Audit Committee to recommend other
independent auditors for appointment for the following year.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions.
Approval of this proposal requires the affirmative vote of a majority of the
votes cast on the proposal at the Annual Meeting by the holders of Common
Stock voting in person or by proxy. Under the Pennsylvania Business
Corporation Law, an abstention is not a vote cast and will not be counted in
determining the number of votes required for approval, though it will be
counted in determining the presence of a quorum.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a summary of the compensation for the years 1997,
1996 and 1995 awarded or paid to, or earned by, the Corporation's Chief
Executive Officer, the three other persons serving as executive officers at
the end of 1997 and one other individual who would have been among the five
highest paid executive officers but for the fact that he was no longer serving
as an executive officer at the end of the year (the "named officers"):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- -------
RESTRICTED SHARES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($) (2) (#)(3) ($)(4) ($)(5)
- ----------------------- ---- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl L. Campbell 1997 $400,010 $168,505 -- $0 25,500 $0 $ 67,445
President and Chief 1996 340,000 127,500 -- 0 87,427 0 62,917
Executive Officer 1995 330,000 129,262 -- 0 16,447 0 53,062
Mark L. Pulaski 1997 $300,014 $ 83,964 -- $0 13,500 $0 $ 40,609
Vice Chairman and 1996 270,000 72,900 -- 0 7,832 0 32,438
Chief Operating Officer 1995 260,000 66,508 -- 0 7,233 0 28,068
Ben G. Rooke 1997 $205,000 $ 57,531 -- $0 9,000 $0 $ 38,192
Executive Vice 1996 195,000 52,650 -- 0 5,723 0 29,202
President 1995 190,000 48,602 -- 0 4,971 0 23,824
Ray L. Wolfe(6) 1997 $195,199 $ 0 $0 $ 0 $ 0
Chairman of the Board
George H. Groves(7) 1997 $276,936 $ 0 -- $0 13,500 $0 $829,009
Former Senior 1996 270,000 72,900 -- 0 7,832 0 42,306
Executive Vice 1995 260,000 66,508 -- 0 6,265 0 32,808
President
</TABLE>
- --------
(1) Bonus information is reported by year in which earned.
(2) The Corporation has made no restricted stock awards.
(3) Options are reported in the year in which granted. The number of shares
granted in 1996 and 1995 has been adjusted to reflect a 3-for-2 split in
the Corporation's Common Stock in August 1996. The option price of all
options shown is 100% of fair market value on the date the options were
granted.
(4) To date, the Corporation has made no long-term incentive plan ("LTIP")
payouts.
(5) The 1997 amounts reported in this column consist of the loan value of the
actual premium paid by the Corporation for a split-dollar insurance policy
for the named officers as follows: Mr. Campbell, $21,937; Mr. Pulaski,
$8,880; Mr. Rooke, $11,902; and Mr. Groves, $20,279; imputed interest
income for 1997 on loans to the named officers under the Corporation's
Management Stock Ownership Program as follows: Mr. Campbell, $18,710; Mr.
Pulaski, $9,827; Mr. Rooke, $7,182; and Mr. Groves, $8,491; employer
matching contributions to the Corporation's retirement savings plans as
follows: Mr. Campbell, $14,210; Mr. Pulaski, $9,832; Mr. Rooke, $6,929;
and Mr. Groves, $8,950; and the above market portions of interest accrued
for 1997 under one retirement savings plan as follows: Mr. Campbell,
$587.12; Mr. Pulaski, $70.40; Mr. Rooke, $179.67; and Mr. Groves, $45.69.
5
<PAGE>
The 1997 amount reported in this column for Mr. Groves also includes
payments made to and obligations forgiven of Mr. Groves in connection with
his resignation from the Corporation. These amounts were paid to Mr.
Groves pursuant to a written agreement that replaced his employment
agreement and are as follows: $450,000 paid in two installments of
$23,078, which was paid in November 1997, and $426,922 which was paid on
January 2, 1998; $200,000 paid on January 2, 1998, in lieu of any welfare,
fringe benefit or other incentive compensation benefits to which Mr.
Groves may have been entitled; and $130,544 which represents the
approximate amount of premiums to be paid by the Corporation for a
$600,000 split dollar life insurance policy for Mr. Groves from October
22, 1997 to April 22, 1999. On April 22, 1999, the policy will be
transferred to Mr. Groves, and he will not be required to repay the
premium payments. If Mr. Groves should die before April 22, 1999, then his
designated beneficiary will receive the death benefits under the policy,
and the Corporation will receive a repayment of the premiums.
(6) Mr. Wolfe's compensation for 1997 does not include compensation paid to
him by Financial Trust Corp prior to May 30, 1997, the effective date of
the merger with the Corporation. Compensation information for 1996 and
1995 is not provided for Mr. Wolfe as he did not serve as an executive
officer of the Corporation during these years.
(7) Mr. Groves resigned from the Corporation effective on October 22, 1997.
STOCK OPTION GRANTS IN 1997
The following table sets forth information concerning the individual grants
of options to purchase the Corporation's Common Stock made to the named
officers in 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER PERCENT OF
OF SHARES TOTAL OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE MARKET DATE
OPTIONS EMPLOYEES PRICE PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN 1997(1) ($/SHARE)(2) ($/SHARE) DATE(3) VALUE($)(4)
- ---- ---------- ------------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl L. Campbell 25,500 11.12% $25.19 $25.19 01/02/2007 $105,090
Mark L. Pulaski 13,500 5.89% $25.19 $25.19 01/02/2007 $ 55,636
801 .35% $39.94 $39.94 12/29/1999 $ 3,042
Ben G. Rooke 9,000 3.07% $25.19 $25.19 01/02/2007 $ 37,091
Ray L. Wolfe 0 -- -- -- -- --
George H. Groves(5) 13,500 5.89% $25.19 $25.19 01/02/2007 $ 0
</TABLE>
- --------
(1) Total options granted to employees in 1997 were 229,369.
(2) The exercise price of options granted to Corporation employees in 1997
ranged from $25.19 to $39.94.
(3) All options, except reload options, become exercisable approximately two
years after the date of grant. Reload options become exercisable 6 months
after date of grant. All options are subject to possible acceleration in
certain events involving an actual or potential change in control of the
Corporation. All options have revocable reload rights. The option granted
to Mr. Pulaski for 801 shares is a reload option.
(4) The grant date present value of the options has been determined utilizing
the Black-Scholes option pricing model. The assumptions used to arrive at
the present values were: stock price volatility of .1500; expected
dividend yield of 4.2%; expected seven-year option term; and a 6.4% risk-
free rate of return.
(5) The 13,500 options were canceled as a result of Mr. Groves resignation
effective on October 22, 1997.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND OPTION VALUES AS OF DECEMBER 31, 1997
The following table sets forth information concerning stock options
exercised by the named officers in 1997 and unexercised stock options held by
the named officers as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT 12/31/97 AT 12/31/97($)(2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl L. Campbell 0 -- 102,355 262,927 $2,526,239 $4,524,183
Mark L. Pulaski 7,502 $ 203,589 78,843 19,163 $1,640,967 $ 318,704
Ben G. Rooke 500 $ 10,740 84,426 14,723 $1,768,804 $ 251,906
Ray L. Wolfe 0 -- 0 5,754 0 $ 87,749
George H. Groves(3) 84,777 $1,378,497 0 0 -- --
</TABLE>
- --------
(1) Represents the difference between the market value on the date of exercise
of the shares acquired and the option price of those shares.
(2) Represents the difference between the aggregate market value at December
31, 1997 of the shares subject to the options and the aggregate option
price of those shares.
(3) On November 21, 1997, Mr. Groves exercised 84,777 options which
represented all of his outstanding vested options. Mr. Groves also had
21,322 unvested options which were canceled as a result of his resignation
effective on October 22, 1997.
HUMAN RESOURCES COMMITTEE
1997 REPORT ON EXECUTIVE COMPENSATION
In compliance with Securities and Exchange Commission guidelines on
disclosure of executive compensation levels and practices, the Human Resources
Committee (the "Committee") of the Corporation's Board of Directors has
prepared the following report for its shareholders and other interested
parties.
ROLE AND COMPOSITION OF THE HUMAN RESOURCES COMMITTEE
The role of the Committee with respect to employee compensation is to
establish the compensation philosophy of the organization and to monitor
compensation plans and related practices for conformity with that philosophy.
With the assistance of a compensation consultant, the Committee has
developed a comprehensive compensation strategy, and as a result of this
effort, the Corporation has adopted a total compensation philosophy that links
more of the compensation of executives, managers and employees in direct
revenue producing positions to the Corporation's performance.
Specifically in the area of executive compensation, the Committee's role
includes establishing appropriate compensation and benefit plans, reviewing
the Chief Executive Officer's recommendations on compensation for executive
officers, and determining compensation for executive officers and for the
Chief Executive Officer. An essential component of this role is the
establishment of performance standards for the Corporation's salary
administration and incentive programs and monitoring actual performance
against those standards.
During 1997, the Committee was composed of eight non-employee directors: Ms.
Barry, Messrs. DeWald, Field, Herr, Miller, Unterberger, Ward and Mr. Beall,
who served as Chairperson./2/ Except for discussions and
- --------
/2/A Subcommittee consisting of Ms. Barry and Messrs. Beall, DeWald, Field,
Miller and Ward was formed to administer the 1996 Performance Unit Plan
and the Corporation's Stock Incentive Plans. References in this report to
actions taken by the Committee include those taken by the Subcommittee
under these plans.
7
<PAGE>
decisions concerning his own compensation, Mr. Campbell attends Committee
meetings for discussions about executive compensation and does offer
recommendations on specific plans and individual actions for consideration by
the Committee.
The Committee met five times during 1997. This report discusses actions
initiated and approved by the Committee over the course of the year.
EXECUTIVE COMPENSATION PROGRAM OBJECTIVES AND OPERATING PHILOSOPHY
The Corporation's executive compensation program is designed to (1) foster
continuous improvement in corporate performance, (2) maximize shareholder
value, (3) attract and retain qualified executives and (4) recognize and
reward executives' collective and individual contributions to the business. To
these ends, the Corporation is pursuing a compensation strategy and specific
compensation plans to tie a significant portion of executive compensation to
the Corporation's success in meeting predetermined performance goals and to
appreciation in the Corporation's stock price.
In setting performance standards for executive officers during 1997, the
Committee considered the compensation philosophy, compared the Corporation's
recent performance to industry indices3 and also considered the Corporation's
stock price performance over the last several years. (See "Stock Price
Performance Graph" below.) The target level of total compensation for the
Corporation's executives, including the executive officers listed in the
tables under "Executive Compensation" above, when expected performance is
achieved, is the median level of market practice among financial services
institutions of similar asset size. The compensation program will provide
better than median level pay when the Corporation's performance exceeds the
expected level of performance.
The primary performance measure used by the Committee is net income. Other
measures that are also considered by the Committee are asset quality, capital
adequacy and prudent risk management. In addition, the Committee considers the
current economic environment and such subjective measures as the officers'
leadership and management performance.
The remainder of this report discusses specific plans, policies and 1997
actions for each component of the executive compensation program./4/
BASE SALARIES
Base salary ranges for the named officers are determined by evaluating the
responsibilities of the positions, required skills and experiences and
prevailing practices among financial services institutions of similar type and
asset size for comparable positions.
Typically, annual salary adjustments are determined through an evaluation of
the Corporation's performance against its goals for the prior year,
performance of functions and business units under the executive's management
and the executive's performance against individual goals assigned for the
prior year. The relative importance of each of the three criteria in making a
salary adjustment decision for a given executive will vary among the
executives and from year to year based on corporate priorities for that
covered time period.
- --------
/3/The Committee and management review reports from securities and
investment banking firms, e.g., SNL Securities and Keefe, Bruyette &
Woods, which monitor performances of commercial banks and other financial
services institutions. Most of the banks included in these reports are
also included in the NASDAQ Bank Stock Index. Further, the Corporation's
Finance Department annually prepares in-depth analyses of financial data
on ten commercial banks of similar or larger asset size operating in the
Pennsylvania, Maryland, West Virginia, Virginia and Ohio banking markets.
/4/Mr. Wolfe's 1997 compensation and benefits are not covered by this report
as they were determined by his employment agreement discussed below.
8
<PAGE>
Corporate goals are expressed in terms of net income or earnings per
share/5/; the same goal bases established for the Management Incentive
Compensation Plan ("MICP"), the annual incentive plan. An example of a
business unit performance measure would be improved financial performance
achieved through increased business and/or expense reduction. An example of an
individual performance measure would be the implementation of a new business
product.
Additionally, the executive's professional development, readiness for other
and broader responsibilities in the organization and overall contribution to
the management and the success of the business are considered. The
Corporation's overall success, coupled with achievements against
functional/business unit and individual business goals, primarily determines
the Committee's salary adjustment decision. The other factors noted may
influence the Committee's decision.
The Chief Executive Officer reviews the performance of each executive
officer, except himself, with the Committee using a specific checklist of
performance goals and performance characteristics, and he offers a specific
pay increase recommendation for the Committee's consideration. The Chairperson
of the Committee likewise uses and discusses with the Committee a similar
checklist of performance goals and performance characteristics for the Chief
Executive Officer, and he offers a recommendation to the Committee on an
appropriate salary action for the CEO. These performance factors include: net
income, asset growth, asset quality, risk management, customer service,
leadership, community involvement, personal development, and the influence of
the economy and regulatory factors on the performance of the Corporation. Once
approved by the Committee, all salary actions for the named officers are
presented to the Board of Directors for ratification.
In January 1997, the Committee approved salary increases for the named
officers, except for Mr. Wolfe. Although each of these executives had
different performance goals for 1996, each had met his respective performance
plan and warranted a salary increase.
ANNUAL PERFORMANCE INCENTIVES
The named officers, except Mr. Wolfe, participate in the Corporation's MICP,
an annual incentive pay plan based primarily on net income achievement against
a specific goal Where an officer has bank subsidiary responsibilities, the
majority of the participant's incentive award is based on the operating
subsidiary's net income performance, and the remainder is based on the
Corporation's earnings per share. Officers, including the eligible named
officers, having corporate responsibilities only receive incentive awards
based solely on achievement of goals expressed in terms of earnings per share.
The Committee has the discretion to modify the cash award for a particular
officer if it determines such action is appropriate. Such action is based on a
subjective evaluation of each officer's performance in such areas as teamwork,
management performance, and support of integration efforts related to recent
acquisitions and consolidations.
For 1997, the Committee established a range of specific achievement levels
for corporate earnings per share and subsidiary net income. If threshold
performance was not achieved, no payment would be made. If performance
exceeded the threshold level of performance, actual awards would be
proportionally greater in line with actual performance up to the defined
maximum award amount.
The Corporation's performance for 1997 exceeded the threshold goal
established under the MICP. The named officers, except Mr. Wolfe and Mr.
Groves, qualified for a cash award. Mr. Campbell, who participates in the
MICP, received a cash award of $168,505. This award was based on the
Corporation's earnings per share performance exceeding the threshold goal.
LONG-TERM INCENTIVES
Stock Options. Stock options were granted to each of the named officers,
except for Mr. Wolfe, and selected senior officers of the Corporation in
January 1997 under the Corporation's 1992 Stock Incentive Plan. These stock
option grants were made according to the Committee's established guideline of
granting options at fair market value using a declining percentage of base
salary based on level of position within the organization to achieve the
desired "mix" of long-term incentive income opportunity for a given position
in the organization.
- --------
/5/Net income is used for executive officers in the Corporation's banking
subsidiaries and earnings per share is used for executive officers in the
Corporation.
9
<PAGE>
The percentage of base salary ranged from 32.5% for the Chief Executive
Officer to a low of 15% for vice presidents, with the exact number of option
grants determined by using the Black-Scholes option pricing model. The size of
the award can vary from year to year based on corporate and individual
performance. Corporate performance is usually gauged in terms of net income,
although other financial measures and performance comparisons within a peer
group may also be considered. In the event of poor corporate performance or
poor individual performance, the Committee can elect to make no award. If
corporate and/or individual performance exceeds expectations, the Committee
may grant larger than typical awards.
The January 1997 stock option awards were granted in recognition of the
Corporation's increase in net income performance for 1996, and the
Corporation's favorable ranking in the banking peer group.
In deciding on stock option awards to eligible participants, the Committee
does not currently consider the total number of outstanding options held by a
participant nor the number of shares held by the participant. The Committee
has not canceled or repriced any prior stock option grants.
Stock options are designed to align executives' interests with those of
shareholders. Typically, stock options are granted with an exercise price
equal to the fair market value on the date of grant./6/ Grants carry a 2-year
cliff vesting provision, which means that the option cannot be exercised for
two years from the date of grant except in certain circumstances involving an
actual or threatened change in control. The granting of options at fair market
value or a premium over fair market value with a minimum 2-year vesting
requirement provides an incentive for the executive to increase shareholder
value over the long term since no benefit of the options can be realized
unless stock price appreciation occurs.
Mr. Campbell received stock option grants of 25,500 shares in 1997 which
reflected the targeted percentage for his position. These grants included
incentive stock options and nonstatutory stock options. Mr. Campbell
participates in the Corporation's Stock Incentive Plan on the same basis as
all other participants.
1996 Performance Unit Plan. In 1996 the Board of Directors approved the
implementation of the 1996 Performance Unit Plan (the "Performance Plan") in
which certain officers of the Corporation would participate, including the
named officers.
The Performance Plan is a cash-based, long-term incentive plan. It is
expected that the Performance Plan will operate in three-year cycles beginning
on January 1, 1996, with a new cycle commencing every two years, i.e., January
1, 1998; January 1, 2000; January 1, 2002. Payout under the Plan for the
initial cycle is based upon the attainment by the Corporation of a range of
pre-established three-year cumulative earnings per share goals. The goals for
the initial cycle were set based on a comparative peer group performance
analysis. The amounts payable under the Performance Plan's initial cycle may
be increased or decreased by 20% if the Corporation's return on average equity
for the three-year cycle ranks at or above the 75th percentile or at or below
the 25th percentile as compared to a peer group of financial institutions.
This Performance Plan was approved by shareholders at the 1997 Annual Meeting.
The Corporation believes that stock options under its Stock Incentive Plans
and performance unit awards under the 1996 Performance Unit Plan qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code, and the Corporation does not anticipate that it will be affected by the
cap on deductibility of executive compensation imposed by that Section.
OTHER EXECUTIVE BENEFITS
In 1994, the Corporation implemented a split-dollar type of insurance policy
which is owned by the covered executive. Under this policy, the Corporation
has a collateral assignment which is intended to reimburse the Corporation for
premiums paid into the policy when the policy is redeemed or the covered
executive dies.
- --------
/6/The Corporation has issued premium stock options in the past. Such stock
options are granted with an exercise price greater than the fair market
value on the date of the grant. No premium stock options were granted in
1997.
10
<PAGE>
In 1995, the Board of Directors approved the Management Stock Ownership
Program (the "Ownership Program"). The Ownership Program is intended, among
other things, to promote alignment of management and shareholder interests and
to encourage management to act like owners with a focus on value creation. To
accomplish these purposes, the Ownership Program establishes stock ownership
goals for the named officers and selected senior officers to be achieved over
a five-year period. At the end of the five-year period, each officer,
including the executive officers, is expected to achieve a level of ownership
of Common Stock having a value equal to the following percentages of the
officer's current base salary: 300% for the chief executive officer, 200% for
the Vice Chairman and Chief Operating Officer and executive vice presidents of
the Corporation, 100% for presidents of the Corporation's bank and trust
company subsidiaries and 100% for senior vice presidents of the
Corporation./7/
In order to assist officers in attaining their stock ownership goals, the
Ownership Program provides for loans to the officers, in amounts not to exceed
50% of the officer's stock ownership goal, to be used to purchase shares of
Common Stock from the Corporation at their fair market value on the date of
purchase. Under the terms of the Ownership Program, the loans will be made on
a nonrecourse basis, and without interest, but will be secured by collateral
having an initial value of 120% of the loan amount and consisting of the
shares of the Corporation's Common Stock purchased with the loan plus
additional shares of the Common Stock or other acceptable collateral owned by
the officer. The loans will be payable in full upon demand of the Corporation
at any time but not later than the target date for achieving the officer's
stock ownership goal. The loans will also be payable in full not later than 90
days after termination of the officer's employment with the Corporation or a
subsidiary for any reason other than death and one year after termination due
to the death of the officer.
In connection with the adoption of the Ownership Program, the Board
recommended that the shareholders approve the 1995 Management Stock Purchase
Plan (the "Purchase Plan"), which provides for the purchase of Common Stock
from the Corporation by eligible employees at a price not less than fair
market value and for the financing of such purchases through loans secured by
the shares so purchased. The shareholders approved the Purchase Plan at the
1995 Annual Meeting. As of December 31, 1997, 22 of the 40 eligible officers,
including three of the named officers, were participating in the Purchase Plan
under the terms of the Ownership Program. All eligible participants in the
Ownership Program are on schedule to achieve their ownership goal.
CONCLUSION
The Corporation's executive compensation program continues to evolve in line
with the objectives noted earlier in this report: continuous improvement in
annual corporate performance, maximizing shareholder value, attracting and
retaining qualified executives and recognizing and rewarding executives'
contributions to the business.
The Committee continuously explores opportunities to enhance the variable
aspects of executive compensation, so as to strengthen the link between total
pay and corporate performance.
Respectfully Submitted by:
THE HUMAN RESOURCES COMMITTEE:/8/ J. Glenn Beall, Jr., Chairperson;
June B. Barry;
Gerald E. Field;
Philip C. Herr, II;
William L. Miller;
Ronald C. Unterberger; and
G. William Ward
- --------
/7/In September 1997, the Committee changed the goal for Senior Vice
Presidents from 50% to 100%, putting them in line with subsidiary
Presidents, and started a new five-year period within which the Senior
Vice Presidents are to achieve their stock ownership goal.
/8/Mr. Richard W. DeWald, who resigned as a member of the Board of Directors
effective January 13, 1998, served as a member of the Committee in 1997
and participated in most of the executive compensation decisions discussed
in the report.
11
<PAGE>
OTHER INFORMATION CONCERNING
DIRECTORS AND EXECUTIVE OFFICERS
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Campbell, the Corporation's President and Chief Executive Officer, and
Mr. Wolfe, Chairman of the Board of the Corporation, are not members of the
Human Resources Committee but are invited guests at Committee meetings. Mr.
Campbell is involved in corporate compensation matters, including compensation
decisions for all named officers except himself. There are no interlocking
relationships, as defined in regulations of the SEC, involving members of the
Human Resources Committee.
BOARD AND COMMITTEE MEETINGS
The Executive Committee of the Board of Directors is composed of Messrs.
Antanavage, Beall, Campbell, Devorris, Herr, Martz, Miller and Wolfe. During
1997 the Executive Committee met five times. The Executive Committee exercises
the powers of the Board of Directors between Board meetings and makes
recommendations to the full Board on various matters. The Executive Committee
reviews the policy and practice of the Corporation and its subsidiaries in the
areas of strategic planning and franchise expansion and reports its
recommendations to the Board for action. The Executive Committee also
functions as a nominating committee and in this capacity establishes criteria
for selection of nominees to stand for election or reelection as Corporation
directors at any annual meeting of shareholders and reports its
recommendations to the Board for action. Any shareholder who desires to have
an individual considered for nomination by the Board must submit his
recommendation in writing to the Secretary of the Corporation at least 90 days
prior to the annual meeting at which the election of directors will occur.
The Audit Committee of the Board of Directors, which met four times during
1997, is composed of Messrs. Antanavage, Detwiler, Devorris, Grant, Holman,
King, Messenger, Rosini and Schoeneman. The Audit Committee recommends the
selection of independent auditors, provides oversight of the internal auditors
of the banks and reviews the reports of those persons.
The Human Resources Committee of the Board of Directors functions as a
compensation committee. The members of the Human Resources Committee, which
met five times in 1997, are Ms. Barry and Messrs. Beall, Field, Herr, Miller,
Unterberger, and Ward. The Human Resources Committee determines the
compensation of the Corporation's executive officers and senior officers and
recommends policy regarding the salary administration program, health and
welfare benefits and annual human resources budget for all employees. The
Human Resources Committee or a subcommittee also administers the Corporation's
Stock Incentive Plans, the Non-Employee Directors' Stock Option Plans, the
Director Fee Plan, the Employee Stock Purchase Plan, the Management Stock
Purchase Plan and the Performance Unit Plan.
During 1997 the Corporation's Board of Directors met seven times. All of the
directors, with the exception of Mr. DeWald, attended at least 75% of the
meetings of the Board and committees of which they were members during the
period they served as such.
DIRECTOR COMPENSATION
In 1997, directors of the Corporation who are not salaried officers of the
Corporation or its subsidiaries received an annual retainer of $10,000
(payable in Common Stock only) and an additional $1,500 (payable in cash or
Common Stock) if they served as chairman of a Board committee. In 1997, non-
employee directors received $1,250 for each Board meeting they attended and
$1,250 for each committee meeting attended on a day other than the date of the
regular Board meeting or a day that adjoins the date of a regular Board
meeting. For committee meetings attended on the same day as a regular Board
meeting, non-employee directors received $500; and for committee meetings
attended on an adjoining day of a regular Board meeting date, non-employee
directors received $750. Non-employee directors that participated in telephone
conferences received $500.
The Corporation's 1992 Director Fee Plan, which was approved by the
shareholders at the 1992 Annual Meeting, permits non-officer directors to
elect to receive payment of their compensation as Corporation and bank
12
<PAGE>
directors either in cash or Common Stock or to defer such compensation for
subsequent payment in cash or Common Stock. During 1997, the Corporation
accrued an aggregate total of $318,750 in director compensation. Of this
amount, $72,500 was paid currently in cash or stock. The balance of $246,250
was deferred compensation, of which $77,500 will be paid in cash and $168,500
will be paid in stock.
The Corporation's 1995 Non-Employee Directors' Stock Option Plan was
approved by the shareholders at the 1995 Annual Meeting. Its purposes are to
promote the long-term success of the Corporation by creating a long-term
mutuality of interests between the non-employee directors and shareholders of
the Corporation, to provide additional inducement for such directors to remain
with the Corporation and to assist the Corporation in attracting and retaining
able persons to serve as outside directors.
Under the Plan, directors who are not employees of the Corporation or a
subsidiary receive annual stock option grants to purchase up to 2,812 shares
of Common Stock at an option price equal to the market value on the date the
options are granted. The options are exercisable two years from the date of
grant, subject to acceleration in certain events involving an actual or
potential change in control of the Corporation or retirement by the director.
The options expire 10 years from the date of grant. Reload options are granted
if a director exercises an option by paying the option price in shares of
Common Stock.
NAMED OFFICER STOCK OWNERSHIP
Information concerning Mr. Campbell's, Mr. Pulaski's and Mr. Wolfe's
beneficial ownership of Common Stock is included in the table above under
"Proposal No. 1--Election of Directors". The following table shows the
beneficial ownership of Common Stock by the other named officers as of April
1, 1998:
<TABLE>
<CAPTION>
PERCENT OF
SHARES BENEFICIALLY COMMON STOCK
NAME OWNED(1) OUTSTANDING
- ---- ------------------- ------------
<S> <C> <C>
Ben G. Rooke................................... 122,273 .24%
George H. Groves............................... 40,508 .08%
</TABLE>
- --------
(1) Shares beneficially owned include the following shares of Common Stock
which the named officers have the right to acquire under currently
exercisable stock options granted under the Corporation's Stock Incentive
Plans: Mr. Rooke, 90,149 shares and Mr. Groves, none. Shares beneficially
owned also include the following shares of Common Stock in their 401(k)
plan accounts for which they have the power to direct the voting: Mr.
Rooke, 3,134 shares and Mr. Groves, 3,474 shares.
NAMED OFFICER EMPLOYMENT AGREEMENTS
The Corporation has entered into employment agreements with certain of its
officers, including the named officers listed in the summary compensation
table. As described in the footnotes to the Summary Compensation Table under
"Executive Compensation" above, Mr. Groves' employment agreement was
terminated in connection with his resignation from the Corporation. The
employment agreements for the other named officers, except Mr. Wolfe, are for
rolling three-year terms (five years for the CEO) and provide that the officer
will continue to be employed for the term of the agreement at not less than
his current compensation unless sooner terminated for cause or by reason of
death, disability or retirement. If the named officer's employment is
terminated by the Corporation without cause or by the officer for "good
reason" as defined in the agreement prior to its expiration, the officer is
entitled to a payment of one and one-half times (two times for the CEO) his
highest annual base salary within the last three years and to a continuation
of employee benefits for 18 months (24 months for the CEO). Under this
scenario, currently, each of the named officers would receive a payment as
follows: Mr. Campbell, $800,020; Mr. Pulaski, $450,021, and Mr. Rooke,
$307,500.
If the named officer's employment terminates in certain circumstances
following a change in control of the Corporation, the officer is entitled to a
payment of two and one-half times the sum of his highest annual base salary
within the last three years and his highest annual incentive award during the
last three years; a continuation of benefits for a period of twenty-four
months; a release of the premium repayment obligation under his split-dollar
life insurance agreement; and certain outplacement services. Under this
scenario, currently, each of the named officers would receive a payment as
follows: Mr. Campbell, $1,421,288, Mr. Pulaski, $959,945; and Mr. Rooke,
$656,328.
13
<PAGE>
In consideration of the agreements, each named officer agrees not to engage
in any business in competition with the Corporation or its subsidiaries for a
period of one year following any termination of his employment, other than a
termination within two years after a change in control.
In connection with the acquisition of Financial Trust Corp ("FT Corp"), the
Corporation entered into an employment agreement with Mr. Wolfe, who at the
time served as Chairman and Chief Executive Officer of FT Corp. The employment
agreement, which became effective on consummation of the FT Corp merger,
provides for Mr. Wolfe's employment by the Corporation for a period of three
years following the effective date of the FT Corp merger, May 30, 1997, at an
all inclusive annual rate of compensation of $350,000, plus participation in
such benefit and qualified retirement plans as are generally available to the
Corporation's employees. From the effective date until the Corporation's
annual meeting of shareholders in 1998, Mr. Wolfe is to serve as Chairman of
the Board of the Corporation. Thereafter during the three-year period, Mr.
Wolfe will serve in such senior executive capacities as are mutually agreed
from time to time between Mr. Wolfe and the Corporation's chief executive
officer. From the end of the three-year period until Mr. Wolfe's 65th birthday
on August 15, 2003, Mr. Wolfe is to be employed by the Corporation as a
consultant at an annual rate of compensation of $177,000, plus participation
in the Corporation's regular medical care benefits plan. The employment
agreement and the compensation and benefits to be provided to Mr. Wolfe
thereunder may not be terminated by the Corporation except upon Mr. Wolfe's
death, total and permanent disability or substantial incapacity for a period
exceeding six months or a breach by Mr. Wolfe of the nondisclosure and
noncompetition provisions of the agreement. The agreement prohibits Mr. Wolfe
from disclosing the Corporation's confidential information at any time or,
during the period of two years after termination of his employment, from
engaging directly or indirectly in any business which is in competition with
the Corporation or any of its subsidiaries in the areas of commercial banking,
mortgage banking, leasing or the taking of deposits and which is located or
operating in any county in which the Corporation or a subsidiary has offices
or any contiguous county. In the event of a change of control of the
Corporation, as defined in the agreement, Mr. Wolfe may elect to be paid the
balance of the cash compensation for the term of the agreement in a single
lump sum. In this event, both parties would be released from any further
obligations under the agreement, except that Mr. Wolfe would remain subject to
the agreement's nondisclosure and noncompetition provisions.
RETIREMENT PLANS
The Corporation has a noncontributory retirement plan which covers
substantially all employees, as well as supplemental plans to pay on an
unfunded basis to certain management employees, including the named officers,
benefits which would have been payable under the principal retirement plan but
for certain limitations contained in the Internal Revenue Code or the decision
of the officer to defer compensation otherwise subject to the plan. The
following table shows the combined annual retirement benefits payable under
these plans to participants, including the named officers, in selected
compensation and years of service classifications:
<TABLE>
<CAPTION>
5-YEAR YEARS OF SERVICE
AVERAGE ----------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
200,000 $ 31,095 $ 46,643 $ 62,190 $ 77,738 $ 93,286 $108,833
300,000 47,595 71,393 95,190 118,988 142,786 166,583
400,000 64,095 96,143 128,190 160,238 192,286 224,333
500,000 80,595 120,893 161,190 201,488 241,786 282,083
600,000 97,095 145,643 194,190 242,738 291,286 339,833
700,000 113,595 170,393 227,190 283,988 340,786 397,583
</TABLE>
The amounts shown in the table are straight-life annuity amounts, assuming
normal retirement at age 65 and no election of any available survivorship
option, and are not subject to offset for social security or other benefits
received by the participant. Benefits under the plans are based on the
participant's average compensation for the five highest years in the ten years
immediately preceding retirement, with compensation including substantially
all taxable and deferred compensation. The 1997 covered compensation for the
named officers and
14
<PAGE>
their years of credited service at December 31, 1997 are as follows: Mr.
Campbell, $537,508 (25 years); Mr. Pulaski, $378,016 (14 years); Mr. Rooke,
$259,959 (16 years); Mr. Wolfe, $384,138 (42 years); and Mr. Groves, $354,992
(12 years).
CERTAIN TRANSACTIONS
Director Devorris is a limited partner in a partnership that leases office
space at market rate to the Corporation and a bank subsidiary of the
Corporation. Mr. Devorris' limited partnership interest is 50%. The total rent
paid by the Corporation and the bank in 1997 was $481,214. In addition, Mr.
Devorris is President of an electrical construction company that completed
electrical work for a new facility of a bank subsidiary of the Corporation for
the amount of $357,110.
As described above in the Human Resources Committee Report under "Other
Executive Benefits," the Corporation has made loans to certain of its
executive officers under the Management Stock Ownership Program. The largest
amounts of such loans outstanding to the named officers since January 1, 1997
and, except in the case of Mr. Groves, the amounts of such loans currently
outstanding are as follows: Mr. Campbell, $494,984; Mr. Pulaski, $259,980; Mr.
Rooke, $189,998; and Mr. Groves $259,970. As required by the terms of the
program, Mr. Groves' loan was repaid to the Corporation following his
resignation. No interest is charged on loans made under this program, but
interest is imputed to the officer and deductible by the Corporation for
federal income tax purposes. The amounts of interest income imputed to the
named officers in 1997 in connection with loans under the program are shown in
the "All Other Compensation" column in the Summary Compensation Table under
"Executive Compensation" above.
The Corporation's bank subsidiaries have made loans in the ordinary course
of business to certain directors and named officers of the Corporation,
including members of their immediate families and corporations or other
organizations in which such persons have a beneficial interest of 10% or more
or are associated as officers, partners or trustees. Such loans were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons
and do not involve more than the normal risk of collectability or present
other unfavorable features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that directors
and certain officers of the Corporation file reports with the SEC with respect
to changes in their beneficial ownership of the Common Stock. Based solely
upon a review of the copies of such reports furnished to the Corporation and
written representations by certain persons that reports on Form 5 were not
required, the Corporation believes that all 1997 Section 16(a) filing
requirements applicable to its directors and officers were complied with.
15
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total returns
(assuming reinvestment of dividends) for the five years ended December 31, 1997
of $100 invested on December 31, 1992 in each of the Common Stock, the CRSP
Total Return Index for the NASDAQ Stock Market (U. S. Companies) and the CRSP
Total Return Index for NASDAQ Bank Stocks.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG KEYSTONE, NASDAQ U.S. STOCK MARKET INDEX AND NASDAQ BANK STOCKS INDEX
<CAPTION>
NASDAQ U.S. NASDAQ
Measurement period STOCK MARKET BANK STOCKS
(Fiscal year Covered) KEYSTONE INDEX INDEX
- --------------------- -------- ------------ -----------
<S> <C> <C> <C>
Measurement PT -
12/31/92 $100 $100 $100
FYE 12/31/93 $111 $115 $114
FYE 12/31/94 $110 $112 $114
FYE 12/31/95 $114 $159 $169
FYE 12/31/96 $149 $195 $223
FYE 12/31/97 $249 $240 $377
</TABLE>
16
<PAGE>
5% BENEFICIAL OWNERS OF COMMON STOCK
The voting and investment power over Common Stock by the trust departments
of the Corporation's subsidiary banks and trust companies is reported above
under "Introduction". The following are the only other persons known by the
Corporation to have or share voting and/or investment power over more than 5%
of the outstanding Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF PERCENT OF OUTSTANDING
OF BENEFICIAL OWNER (1) COMMON STOCK COMMON STOCK
- ----------------------- ----------------------- ----------------------
<S> <C> <C>
The Capital Group Companies,
Inc. 2,928,950(2) 5.7%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- --------
(1) The information contained in the table and these footnotes is based on a
Schedule 13G dated February 10, 1998, which was filed by the above-named
company with the Securities and Exchange Commission.
(2) The Capital Group Companies, Inc. ("CGC") is the parent holding company of
a group of investment management companies. Of these shares, CGC reports
that its subsidiaries have sole voting power over 735,000 shares, no
voting power over 2,193,950 shares and sole dispositive power over
2,928,950 shares.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Proposals of shareholders intended to be presented at the Corporation's 1999
Annual Meeting must be received by the Secretary of the Corporation at the
address set forth on page 1 above, not later than December 10, 1998 in order
to be considered for inclusion in the Corporation's proxy statement and form
of proxy for that meeting.
The Corporation's Restated Articles of Incorporation require that any
shareholder who intends to nominate a candidate for election as a director of
the Corporation must furnish a written notice of the nomination, containing
the information specified in the Articles, so that it is received by the
Secretary of the Corporation not later than 120 days in advance of the meeting
at which the election is to be held. A copy of these requirements will be
furnished to any shareholder upon request to the Secretary at the address set
forth on page 1.
OTHER MATTERS
As of the date of this Proxy Statement, no matters are expected to be
presented to the shareholders for action at the Annual Meeting other than
those referred to in the Notice of Meeting. However, if any further business
should properly come before the meeting, the persons named in the accompanying
proxy will be authorized to vote on such matters in accordance with their best
judgment.
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS DEPARTMENT OF THE
CORPORATION, AT THE ADDRESS SET FORTH ON PAGE 1, THE CORPORATION WILL FURNISH
WITHOUT CHARGE TO ANY SHAREHOLDER WHOSE PROXY IS SOLICITED HEREBY A COPY OF
THE CORPORATION'S 1997 ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO.
17
<PAGE>
EXPENSES OF SOLICITATION
The cost of solicitation of proxies for the Annual Meeting will be paid by
the Corporation. Brokerage houses, nominees, fiduciaries and other custodians
will be requested to forward proxy materials to beneficial owners of shares
held of record by them and will be reimbursed by the Corporation for their
expenses. In addition to solicitation by mail, directors, officers and
employees of the Corporation and its subsidiaries may solicit proxies in
person or by telephone or otherwise. Such persons will receive no additional
compensation for these services.
By the Order of the Board of Directors,
/s/ Ben G. Rooke
Ben G. Rooke, Secretary
April 9, 1998
18
<PAGE>
KEYSTONE FINANCIAL, INC.
PROXY FOR 1998 ANNUAL MEETING
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints A. Joseph Antanavage, Jr., June B. Barry
and Richard G. King, or any of them, as proxies, with full power of
substitution, to vote all shares of Common Stock of Keystone Financial, Inc.,
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held May 21, 1998 and at any adjournment thereof, as follows:
(To be Completed and Signed on Reverse Side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
KEYSTONE FINANCIAL, INC.
May 21, 1998
Please detach and Mail in the Envelope Provided
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
A [ X ] Please mark your votes as in this example.
FOR all nominees
(except as shown WITHHOLD AUTHORITY
below) to vote for all nominees
1. Election of Directors for terms [ ] [ ]
ending in 2000 and 2001
Nominee: (for a term expiring in 2000)
Molly Dickinson Shepard
Nominees: (for terms expiring in 2001)
Carl L. Campbell
Paul I. Detwiler, Jr.
Allan W. Holman, Jr.
James I. Scheiner
Ronald C. Unterberger
G. William Ward
A vote FOR includes discretionary authority to vote for a substitute nominee if
any nominee named becomes unable or unwilling to serve. To withhold authority to
vote FOR any individual nominee, write that nominee's name on the line below.
___________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors for 1998.
3. To vote in their discretion on such other matters as may properly come before
the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Items 1 through 3.
PLEASE MARK, DATE, EXECUTE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
SIGNATURE(S)___________________________________________ DATE________________1998
Note: Please sign exactly as name appears hereon. For joint accounts, each joint
owner should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a
corporation, please sign the full corporate name by President or other
authorized officer, giving your full title as such. If a partnership,
please sign in the partnership name by authorized person, giving your full
title as such.
<PAGE>
KEYSTONE FINANCIAL, INC. -- 401(k)
VOTING AUTHORIZATION FOR 1998 ANNUAL MEETING
This Authorization follows the form of the Proxy solicited on behalf of the
Board of Directors
The undersigned hereby authorizes Mid-State Bank and Trust Company, as
Trustee of the Keystone Financial 401(k) Savings Plan, to vote by proxy all
shares of Common Stock of Keystone Financial, Inc. which are allocated to the
account of the undersigned under the Keystone Financial 401(k) Savings Plan and
which the Trustee is entitled to vote at the Annual Meeting of Shareholders to
be held May 21, 1998 and any adjournment thereof, as follows:
(To be Completed and Signed on Reverse Side)
<PAGE>
Please date, sign and mail your
voting authorization card back as soon as possible!
Annual Meeting of Shareholders
KEYSTONE FINANCIAL, INC. - 401(K)
May 21, 1998
Please detach and Mail in the Envelope Provided
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
A [ X ] Please mark your votes as in this example
FOR all nominees
(except as shown WITHHOLD AUTHORITY
below) to vote for all nominees
1. Election of Directors for terms [ ] [ ]
ending in 2000 and 2001
Nominee: (for a term expiring in 2000)
Molly Dickinson Shepard
Nominees: (for terms expiring in 2001)
Carl L. Campbell
Paul I. Detwiler, Jr.
Allan W. Holman, Jr.
James I. Scheiner
Ronald C. Unterberger
G. William Ward
A vote FOR includes discretionary authority to vote for a substitute nominee if
any nominee named becomes unable or unwilling to serve. To withhold authority to
vote FOR any individual nominee, write that nominee's name on the line below.
___________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors for 1998.
The Trustee will vote as directed in this Authorization if it is properly
executed. If no direction is made, this Authorization will be voted FOR Items 1
and 2.
PLEASE MARK, DATE, EXECUTE AND RETURN THIS AUTHORIZATION PROMPTLY IN THE
ENCLOSED ENVELOPE.
SIGNATURE(S)___________________________________________ DATE________________1998
Note: Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title
as such.
