<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
<TABLE>
<S> <C> <C>
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 sec. 240.14a-11(c)
or sec. 240.14a-12
</TABLE>
First Western Bancorp, Inc.
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(Name of Registrant as Specified in its Charter)
First Western Bancorp, Inc.
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[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:
------------------------------------------------------------
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:
------------------------------------------------------------
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 No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
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</TABLE>
<PAGE> 2
101 East Washington Street
P.O. Box 1488
New Castle, PA 16103-1488
Telephone: (724) 652-8550
Fax: (724) 652-0246
LOGO
March 20, 1998
To Our Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
First Western Bancorp, Inc., to be held on Tuesday, April 21, 1998, beginning at
10:30 a.m., local time, at the New Englander, 3009 Wilmington Road, New Castle,
Pennsylvania. In the back of this Proxy are directions to the New Englander; if
you need additional assistance, please contact the corporate office at (800)
696-2572.
In addition to our regular business, we will present summary performance
information for 1997 and discuss our progress with some of our profit
initiatives. Several associates will discuss their experiences and current
initiatives as we continue our drive to be a superior bank. Following the
meeting, a light lunch will be served to all attending shareholders to provide
an opportunity to meet informally with the directors and management of First
Western and its subsidiaries. Please accept this invitation to attend the
meeting and join us for the luncheon afterwards.
The formal Notice of Annual Meeting and Proxy Statement, which follow, include a
listing and discussion of the matters upon which you will act.
Whether or not you plan to attend the meeting, we urge you to mark, sign, date
and return the enclosed Proxy Card in the accompanying postage-paid envelope so
that as many shares as possible may be represented at the meeting. Your vote is
important and your cooperation in executing and returning the Proxy Card
promptly will be appreciated.
Sincerely,
/s/ THOMAS J. O'SHANE
-----------------------
Thomas J. O'Shane
Chairman, President and
Chief Executive Officer
Subsidiaries: First Western Bank, N.A. - First Western Trust Services Company
<PAGE> 3
101 East Washington Street
P.O. Box 1488
New Castle, PA 16103-1488
Telephone: (724) 652-8550
Fax: (724) 652-0246
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of First Western
Bancorp, Inc. ("First Western") will be held at the New Englander, 3009
Wilmington Road, New Castle, Pennsylvania 16105, on Tuesday, April 21, 1998 at
10:30 a.m., local time, for the purpose of considering and voting upon the
following:
1. The election of three directors whose terms will expire in 2001 and one
director whose term will expire in 1999; and
2. The approval of a new Equity Compensation Plan for Non-Employee Directors,
with an aggregate of 200,000 shares of Common Stock reserved for issuance
under the plan.
3. Such other business as may properly be brought before the meeting and any
adjournment or adjournments thereof.
Only shareholders of record of First Western at the close of business on March
9, 1998 are entitled to notice of and to vote at the Annual Meeting.
Enclosed herewith are a Proxy Statement and form of Proxy. We urge you to mark,
date, sign and return the Proxy as promptly as possible whether or not you plan
to attend the meeting in person. If you do attend the meeting, you may, if you
wish, withdraw your Proxy and vote in person. In any event, you may revoke your
Proxy prior to its exercise.
By Order of the Board of Directors,
/s/ ROBERT H. YOUNG
------------------------
Robert H. Young
Executive Vice President-Chief
Financial Officer,
Secretary and Treasurer
New Castle, Pennsylvania
March 20, 1998
-1-
Subsidiaries: First Western Bank, N.A. - First Western Trust Services Company
<PAGE> 4
[THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE> 5
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
FIRST WESTERN BANCORP, INC.
GENERAL INFORMATION
The accompanying Proxy is being solicited by the Board of Directors of First
Western Bancorp, Inc. ("First Western" or the "Company") for use at the Annual
Meeting of Shareholders of First Western to be held April 21, 1998, 10:30 a.m.,
local time, at the New Englander, 3009 Wilmington Road, New Castle, Pennsylvania
and for use at any adjournment or adjournments thereof.
The Proxy may be revoked at any time prior to its exercise by written notice of
revocation or by a later dated Proxy sent to the Secretary of First Western at
its principal executive offices, provided such notice is received prior to
exercise. Shareholders who attend the meeting may, if they wish, withdraw their
Proxy and vote in person.
The Board of Directors has fixed the close of business on March 9, 1998, as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting. As of that date First Western had issued and
outstanding 11,203,298 shares of its common stock, par value $5.00 per share
("Common Stock"), eligible to vote at the Annual Meeting. First Western's
authorized capital consists of 20,000,000 shares of Common Stock and 4,000,000
shares of preferred stock, without par value ("Preferred Stock"). No shares of
preferred stock have been issued. Holders of Common Stock are entitled to one
vote for each share of Common Stock held on all matters, except with respect to
the election of directors, for which shareholders have the right to cumulate
their votes.
First Western is a Pennsylvania business corporation and is registered with the
Federal Reserve Board as a bank holding company, with one wholly-owned banking
subsidiary, First Western Bank, National Association ("FW Bank" or "Bank"). A
former banking subsidiary, First Western Bank, Federal Savings Bank ("FW
Savings"), was merged into FW Bank in September 1997. First Western has three
non-banking subsidiaries: First Western Trust Services Company ("Trust
Services"), which provides trust, estate management and financial services to
customers in the market areas of FW Bank, First Western Investment Services
Company, a Delaware investment company which holds investment securities for
First Western, and First Western Capital Trust I, a Delaware business trust.
The principal executive offices of First Western are located at 101 East
Washington Street, New Castle, Pennsylvania 16101 (mailing address: P. O. Box
1488, New Castle, Pennsylvania, 16103-1488). This Proxy Statement and the
accompanying Notice of Meeting and Proxy Card are first being mailed to
shareholders on or about March 20, 1998. A copy of First Western's Annual Report
for the fiscal year ended December 31, 1997, which includes First Western's
consolidated financial statements, accompanies this mailing.
All expenses of this solicitation, including the cost of mailing, will be borne
by First Western. First Western will not pay any compensation for the
solicitation of proxies, but upon request will reimburse banks, brokers, and
other nominees, fiduciaries and custodians for their reasonable expenses
incurred in sending these proxy materials to beneficial owners and obtaining
their instructions. In addition, proxies may be solicited by directors, officers
and management personnel of First Western and its subsidiaries. Solicitations
may be made by mail, telephone, facsimile or in person.
-3-
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Bylaws of First Western provide that the Board of Directors shall consist of
not fewer than five persons, the exact number to be fixed and determined from
time to time by a resolution of the Board or of the shareholders. The Board's
current size is set at eleven members. On May 30, 1997, John P. O'Leary, Jr.
resigned from the Board for personal reasons, resulting in a reduction in the
total size of the Board from twelve to eleven members. Pursuant to First
Western's Bylaws, as amended, nominations for directors other than those made by
the Board must be in writing and delivered or mailed to the Chairman of First
Western no later than January 31 for an election to be held at the annual
meeting of shareholders that year and no later than 45 days prior to any other
meeting of shareholders called for the election of directors; provided, however,
that if less than 21 days notice of such other meeting is given to shareholders,
then nominations for directors shall be mailed or delivered to the Chairman of
First Western no later than the close of business on the seventh day following
the day on which such notice of meeting was mailed. Nominations by shareholders
shall contain the following information to the extent known by the nominating
shareholder: (i) the name and address of the proposed nominee; (ii) the
principal occupation of the proposed nominee; (iii) the total number of shares
of Common Stock to be voted for the proposed nominee; (iv) the name and resident
address of the nominating shareholder; and (v) the number of shares of Common
Stock held by the nominating shareholder.
The Board, prior to the 1998 Annual Meeting, is currently divided into two
classes of four members each (1998 and 1999) and one class of three members
(2000). The term of office of one class expires each year. Nominees to the class
of directors whose term expires at each Annual Meeting are generally elected for
a three-year term. However, in the event the number of directors is changed, any
increase or decrease is to be so apportioned among the classes so as to maintain
the classes as nearly equal in number as possible. Any additional director of a
class shall hold office for a term which shall coincide with the term of such
class.
In February 1995, the Board adopted an amendment to the Bylaws which permits a
former President or Chairman to be nominated to the Board for a one-year term
without regard to any age limitation in the Bylaws. Section 2.3 of the Bylaws
requires retirement from the Board at the expiration of a director's term after
reaching age 70. In adopting the amendment, the Board recognizes that a former
President or Chairman of First Western would provide experience, expertise and
historical continuity to First Western and would provide significant and
substantial value in continuing to be represented on the Board, subject to
election at each Annual Meeting of Shareholders that such person continues to be
nominated. John W. Sant, age 77, former Chairman, President and Chief Executive
Officer, is being nominated by the Board for an additional one-year term to
expire in 1999. At Annual Meetings in 1995, 1996 and 1997, Mr. Sant was
nominated for and reelected to the Board for successive one-year terms.
The class whose term will expire as of the date of the 1998 Annual Meeting of
Shareholders consists of four directors, all of whom are nominees for
reelection. The Board has nominated three persons for election as directors for
a three-year term expiring in 2001--Wendell H. Boyd, Robert C. Duvall and Louis
J. Kasing, Jr. as continuing directors, and John W. Sant as a continuing
director for a one-year term expiring in 1999. Assuming the election of these
three nominees to the 2001 class and Mr. Sant to the 1999 class, the 1999 class
of directors will consist of five members, and the 2000 and 2001 class of
directors will consist of three members each.
Each nominee has advised First Western of his willingness and ability to serve
if elected. If however, prior to the election of directors at the 1998 Annual
Meeting, any of the nominees becomes unavailable or proves unable to serve for
any reason, proxies will be voted for the election of such other person or
persons as the Board of Directors may select to replace such nominee. MANAGEMENT
AND THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTORS.
The Articles of Incorporation of First Western provide that in all elections of
directors, each shareholder has the right to vote the number of shares owned by
him for as many persons as there are directors to be elected, or to cumulate
such votes and give one candidate as many votes as equals the number of
directors multiplied by the number of shares, or to distribute his total votes
among as many candidates as desired. Unless otherwise specified, execution of a
Proxy will confer discretionary authority to the persons named therein as
proxies to cumulate votes.
-4-
<PAGE> 7
First Western is organized under the laws of the Commonwealth of Pennsylvania.
Pursuant to the provisions of the Pennsylvania Business Corporation Law of 1988,
as amended, the affirmative vote of a plurality of the votes cast by the
shareholders at an annual meeting of a corporation is required to elect the
directors of that corporation. Accordingly, abstentions and broker non-votes
have no effect on the outcome of the election of directors. Proxies solicited by
the Board of Directors will be voted in favor of the nominees for directors
unless otherwise indicated thereon.
The following tables set forth certain information about the nominees for
election as directors and about the continuing directors of First Western. The
information includes the number of shares of Common Stock which each of them
owned beneficially as of January 31, 1998, and the percentage which those shares
represented of the total outstanding Common Stock in any instance where the
percentage equaled or exceeded one percent. Each nominee or director has been
engaged in the principal occupation listed for five years or more, except as
otherwise indicated in the table. Except as noted below, there are no family
relationships among current directors, nominees for directors, executive
officers or nominees for executive officers of either First Western or its
subsidiaries.
NOMINEES FOR DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001
<TABLE>
<CAPTION>
SHARES OF PERCENT
COMMON STOCK OWNED
NAME, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE BENEFICIALLY (IF 1% OR
DURING PAST FIVE YEARS AND DIRECTORSHIPS (1) AGE (1) OWNED(2) MORE)
- ------------------------------------------------- --------- ------------ ---------
<S> <C> <C> <C>
Wendell H. Boyd 58 13,956 --
Partner, D.M. Boyd Co. (manufacturer of
modified soils for golf course industry);
Member, Audit and Loan Review Committees of
First Western; Director of First Western since
1995
Robert C. Duvall 55 32,591 --
Vice President of Finance, Wampum Hardware Co.
(explosives distributor for the blasting
industry); Director, Nobel Insurance Limited;
Officer and Director of IRECO Midwest, Inc.
(affiliated with Wampum Hardware Co.);
Chairman, Compensation Committee and Member,
Nominating/Corporate Governance and
Asset/Liability Committees of First Western;
Director of First Western since 1995(3)
Louis J. Kasing, Jr. 69 8,622 --
President, Kasing Auto Sales, Inc.; Member,
Asset/Liability, Loan Review and Dealer Center
Committees of First Western; Director of First
Western since 1990
NOMINEE FOR DIRECTOR WHOSE TERM WILL EXPIRE IN 1999
John W. Sant 77 92,557 --
Retired; Chairman, First Western through April
1995; President and Chief Executive Officer,
First Western through 1990; Director, Trust
Services; Chairman, Nominating/Corporate
Governance Committee and Member, Compensation
and Asset/Liability Committees of First
Western; Director of First Western since
1966(4),(5)
</TABLE>
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<PAGE> 8
CONTINUING DIRECTORS WHOSE TERMS WILL EXPIRE IN 1999
<TABLE>
<CAPTION>
SHARES OF PERCENT
COMMON STOCK OWNED
NAME, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE BENEFICIALLY (IF 1% OR
DURING PAST FIVE YEARS AND DIRECTORSHIPS (1) AGE (1) OWNED(2) MORE)
- ------------------------------------------------- --------- ------------ ---------
<S> <C> <C> <C>
John W. Lehman, M.D. 65 37,445 --
Physician, Beaver Valley Orthopedics
Association; Member, Audit,
Nominating/Corporate Governance and
Asset/Liability Committees of First Western;
Director of First Western since 1986(4)
Thomas S. Mansell 58 91,387 --
Senior Vice President, Assistant Secretary and
Legal Counsel of First Western; Director, Trust
Services; Director of First Western since
1990(6),(7)
Richard C. McGill 61 55,900 --
Retired; Former Managing Partner, McGill,
Power, Bell and Co., Certified Public
Accountants; Chairman, Loan Review Committee
and Member, Audit Committee of First Western;
Director of First Western since 1990(4)
Harold F. Reed, Jr. 70 43,369 --
Partner, Reed, Luce, Tosh, Wolford and Douglass
(law firm); Director, Tuscarora Incorporated
(manufacturer of custom molded products);
Chairman, Trust Services; Member, Compensation
Committee of First Western; Director of First
Western since 1986(4)
</TABLE>
CONTINUING DIRECTORS WHOSE TERMS WILL EXPIRE IN 2000
<TABLE>
<CAPTION>
SHARES OF PERCENT
COMMON STOCK OWNED
NAME, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE BENEFICIALLY (IF 1% OR
DURING PAST FIVE YEARS AND DIRECTORSHIPS (1) AGE (1) OWNED(2) MORE)
- -------------------------------------------------- --------- ------------ ---------
<S> <C> <C> <C>
James M. Campbell 54 49,972 --
President, Shenango Steel Buildings, Inc. (steel
fabrication company); Member, Compensation and
Asset/Liability Committees of First Western;
Director of First Western since 1990(4),(8)
Floyd H. McElwain 51 10,695 --
President, McElwain Oldsmobile-Cadillac, Inc.;
Chairman, Audit Committee and Member, Dealer
Center Committee of First Western; Director of
First Western since 1990
Thomas J. O'Shane 50 214,294 1.86%
Chairman, First Western since April, 1996 and
President and Chief Executive Officer; Director,
Nobel Insurance Limited; Director, Federal
Reserve Bank of Cleveland-Pittsburgh Branch;
Chairman, FW Bank and Vice Chairman, Trust
Services; Chairman, Asset/Liability Committee
and Member, Nominating/Corporate Governance and
Loan Review Committees of First Western;
Director of First Western since 1988(9)
</TABLE>
-6-
<PAGE> 9
- ---------
<TABLE>
<C> <S>
(1) As of January 31, 1998.
(2) Includes shares of Common Stock owned by immediate families
(spouses, minor children and relatives sharing the same
home) of the respective persons and, if applicable, shares
of Common Stock held in the First Western Bancorp, Inc.
401(k) Profit-Sharing and Stock Bonus Plan, an individual
grantor trust related to the First Western Bancorp, Inc.
Supplemental Executive Retirement Plan, or the First Western
Bancorp, Inc. Deferred Compensation Plan for Directors.
(3) Includes 26,930 shares of Common Stock held beneficially in
the name of Wampum Hardware Co., with authority to vote such
shares.
(4) Years served as a director of First Western include years
served as director of FW Bank or its predecessors.
(5) John W. Sant is the uncle of Stephen R. Sant, President and
Chief Executive Officer of FW Bank and Executive Vice
President-Chief Operating Officer of First Western.
(6) Thomas S. Mansell disclaims beneficial ownership of 3,499
shares of Common Stock owned by his spouse and his children
which are included in the total shares indicated.
(7) Includes options to purchase 20,605 shares of Common Stock
which are exercisable within 60 days of January 31, 1998.
(8) Includes 1,009 shares of Common Stock held beneficially in
the name of Shenango Steel Buildings, Inc., with authority
to vote such shares.
(9) Includes options to purchase 127,197 shares of Common Stock
which are exercisable within 60 days of January 31, 1998.
</TABLE>
All directors and officers of First Western as a group (22 persons) owned
beneficially 998,306 shares of Common Stock of First Western (including options
to acquire 332,687 shares which are exercisable within 60 days of January 31,
1998), or 8.67% of the 11,511,161 shares of Common Stock outstanding and options
which are exercisable within 60 days of January 31, 1998.
MEETINGS AND COMMITTEES
The Board of Directors of First Western met 10 times in 1997. All incumbent
directors named above attended 75% or more of the aggregate number of Board of
Directors meetings and, if applicable to their service, committee meetings held
in 1997, except Louis J. Kasing, Jr. (68%) and John W. Lehman, M.D. (70%). The
Board of Directors currently has a Nominating/Corporate Governance Committee, a
Compensation Committee and an Audit Committee. The Board currently has no
Executive Committee, with the full Board serving in such capacity. The
Compensation Committee met eight times in 1997 and is comprised solely of
non-employee directors, including Robert C. Duvall (Chairman), James M.
Campbell, Harold F. Reed, Jr. and John W. Sant. The Nominating/Corporate
Governance Committee met four times in 1997 and is comprised of John W. Sant
(Chairman), Robert C. Duvall, John W. Lehman, M.D. and Thomas J. O'Shane.
The Audit Committee is comprised solely of independent directors, and for 1997,
included Floyd H. McElwain (Chairman), Wendell H. Boyd, John W. Lehman, M.D. and
Richard C. McGill. The Audit Committee's duties include, but are not limited to,
engaging and terminating independent auditors and approving fees charged,
reviewing the audit plan, the results of the auditing engagement, any
disagreements with management, their letter of recommendations and the adequacy
of internal accounting controls for First Western, and supervising the internal
audit function. First Western's internal audit department reports to the Audit
Committee. The Audit Committee met five times in 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Mr. Thomas J. O'Shane, Chairman, President and Chief Executive Officer of First
Western, is a director and a member of the Compensation Committee of Nobel
Insurance Limited. Mr. Robert C. Duvall, a director of Nobel Insurance Limited,
is also a director of First Western, and is Chairman of First Western's
Compensation Committee.
-7-
<PAGE> 10
Mr. John W. Sant, formerly Chairman, President and Chief Executive Officer of
First Western, is a member of the Compensation Committee. Mr. Harold F. Reed,
Jr., a member of the Compensation Committee, is Chairman of Trust Services.
DIRECTORS' COMPENSATION
Directors of First Western who are not employees of First Western or its
subsidiaries receive $750 for each meeting of the Board of Directors attended
and $350 for each committee meeting attended, with the chairperson of each
committee receiving $700 for each committee meeting attended. An annual retainer
of $4,000 is currently paid to all Board members. Occasionally, individual
directors are asked to meet with the Chairman of First Western on matters of
interest or importance or requiring the consultative services of such director.
In such situations, the per meeting rates applicable to a committee member or
committee chairperson, as the case may be, are paid to the individual.
Directors of FW Bank and Trust Services who are not employees of First Western
or its subsidiaries receive $400 for each Board meeting attended and $350 for
each committee meeting attended, with the chairperson of each committee
receiving $700 for each committee meeting attended. An annual retainer of $3,000
per member is also paid. The law firm of Reed, Luce, Tosh, Wolford and Douglass,
of which Harold F. Reed, Jr., a director, is a partner, served as an outside
legal counsel for FW Bank, for which such firm received a retainer of $20,000
plus fees for special legal work on an as-billed basis in 1997.
All Directors of First Western and/or its subsidiaries may defer the receipt of
their fees, according to the terms of the First Western Bancorp, Inc. Deferred
Compensation Plan for Directors, until the earlier of their retirement from
First Western and/or a subsidiary board or their death. The director may choose
to have deferred fees accrued with interest credited at market rates, or to have
such fees, plus prior plan balances, funded through a grantor trust agreement,
with Trust Services serving as trustee, and invested in First Western Common
Stock.
PROPOSAL NO. 2
APPROVAL OF EQUITY COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted the Equity Compensation Plan for Non-Employee
Directors of First Western Bancorp, Inc. and First Western Bank, N.A. (the
"Directors' Plan"). A copy of the Directors' Plan is attached to this Proxy
Statement as Appendix A. The following summary does not purport to be fully
descriptive and reference is made to the full text of the Directors' Plan for
more detailed information.
Purpose and Effective Date. The purpose of the Directors' Plan is to increase
the ownership of Common Stock by outside directors of the Company and FW Bank by
providing for the payment of all or a substantial portion of outside directors'
retainer and meeting fees in the form of shares of Common Stock or options to
purchase such shares. The Directors' Plan became effective as of February 17,
1998, the date it was approved by the Boards of Directors of the Company and the
Bank. Approximately 24 persons will initially be eligible to participate in the
Directors' Plan. The closing price of the Common Stock on the Nasdaq Stock
Market on March 10, 1998 was $28.25 per share.
Shares Reserved and Administration. Up to an aggregate of 200,000 shares of
Common Stock may be issued under the Directors' Plan. The number of shares
available for award under the Directors Plan, and the terms and conditions of
outstanding option grants, are subject to adjustment in connection with certain
significant corporate events.
The Directors' Plan will be administered by the Board of Directors of the
Company. The Board of Directors shall have complete power and authority to amend
or terminate the Directors' Plan at any time.
Retainer Fees. Each person who first becomes a non-employee director of the
Company or FW Bank on or after the effective date of the Directors' Plan ("new
director") shall receive no cash retainer fee but instead will receive an annual
retainer fee in the form of non-qualified options to purchase Common Stock
("Retainer Fee Options"). These annual grants of Retainer Fee Options will be
made as of the date of each annual meeting of the stockholders of the Company
and will have a value as of the date of grant, determined using the
Black-Scholes option valuation model and such assumptions as the Board deems
appropriate, equal to the annual retainer amount for the applicable year.
-8-
<PAGE> 11
Each person who was a non-employee director immediately prior to the effective
date of the Directors' Plan ("current director") will receive Retainer Fee
Options as of each annual meeting date in the same manner as a new director,
except that each current director may make a one-time election to receive all
(but not less than all) of his or her annual retainer amount in the form of cash
rather than Retainer Fee Options. A current director who elects a cash portion
can subsequently revoke this election and take all Retainer Fee Options for the
future (but cannot then go back to cash).
The exercise price of each Retainer Fee Option will equal the fair market value
of the underlying shares of Common Stock on the date of grant. Retainer Fee
Options will vest and become exercisable in three substantially equal
installments on the last day of June, September and December immediately
following the date of grant. Vesting will accelerate upon (i) the director's
retirement from the Board on or after attaining age 65 or death or total and
permanent disability while serving as a director or (ii) the occurrence of a
change in control (as defined in the Directors' Plan). Unvested Retainer Fee
Options will expire upon termination of Board service for any reason, and vested
options will expire upon the earlier to occur of (A) ten years from the date of
grant of the option; and (B) the later of (i) one year following the director's
cessation of Board service for any reason and (ii) in the case of a director's
retirement from the Board on or after attaining age 65, three years from the
date such option first became exercisable.
Meeting Fees. Each new director will automatically receive all meeting fees in
the form of restricted shares of Common Stock ("Meeting Fee Shares"). The
Meeting Fee Shares will be issued quarterly, but the shares will not be
transferable by the director for two years from the date of issuance, except
that gifts and other transfers to or for the benefit of immediate family members
will be permitted. The transfer restrictions will automatically lapse (i) if the
director retires from Board service on or after attaining age 65 or dies or
becomes totally and permanently disabled while serving as a director or (ii)
upon the occurrence of a change in control. Meeting Fee Shares will not be
subject to forfeiture. The number of Meeting Fee Shares issuable to a new
director as of a particular quarterly issue date will equal the quotient
obtained by dividing the amount of meeting fees payable to the director as of
such date by a per share price of the Common Stock equal to 50% or more (as
determined by the Board) of the fair market value per share of the Common Stock
as of such quarter-end.
Each current director will receive Meeting Fee Shares in the same manner as a
new director, except that each current director may make a one-time election, at
any time prior to the 1998 Annual Meeting, to receive all (but not less than
all) of his or her meeting fees in the form of cash rather than Meeting Fee
Shares. A director who elects a cash portion can subsequently revoke this
election and take all Meeting Fee Shares for the future (but cannot then go back
to cash).
Each non-employee director who would otherwise be receiving Meeting Fees in the
form of Meeting Fee Shares with respect to a calendar year (i.e. all new
directors and each current director who did not elect to receive his or her
Meeting Fees in cash) may irrevocably elect prior to the commencement of the
calendar year, or in the case of calendar year 1998, prior to the 1998 Annual
Meeting, to have all (but not less than all) of his or her Meeting Fees for such
calendar year deferred under the Company's Deferred Compensation Plan for
Directors. If a director makes such an election, the Company will credit to such
director under the Deferred Compensation Plan as of the last day of each
calendar quarter during such year a number of shares of Common Stock equal to
the number of Meeting Fee Shares that would have been issued to such director
but for such deferral election.
Automatic Option Grants. Each new director will receive an automatic
non-qualified stock option grant for 1,000 shares of Common Stock, effective as
of his or her first date of Board service ("Automatic Options"). The exercise
price of each Automatic Option will equal the fair market value of the
underlying shares of Common Stock on the date of grant of the option. Automatic
Options will vest in three substantially equal installments on the first, second
and third anniversaries of the date of grant. Vesting will accelerate upon (i)
the director's retirement from the Board on or after attaining age 65 or death
or total and permanent disability while serving as a director or (ii) upon the
occurrence of a change in control (as defined in the Directors' Plan). A current
director shall receive a grant of Automatic Options, as of the 1998 Annual
Meeting date of the Directors' Plan, only if such current director does not
elect to receive any portion of his or her retainer fees or meeting fees in
cash. Unvested Automatic Options will expire upon termination of Board service
for any reason and vested Automatic Options will expire upon the earlier to
occur of (A) ten years from the date of grant of the option; or (B) the later of
(i) one year following the director's cessation of Board
-9-
<PAGE> 12
service for any reason and (ii) in the case of a director's retirement from the
Board on or after attaining age 65, three years from the date such Automatic
Option first became exercisable.
Tax Consequences. The following is a summary of the principal federal income
tax consequences of grants of Common Stock and stock options under the
Directors' Plan under present law. The summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign tax
consequences.
Under the Internal Revenue Code, the issuance of Meeting Fee Shares in lieu of
cash meeting fees will result in ordinary income to the director equal to the
fair market value of the shares of the date of issuance, determined without
regard to the transfer restrictions applicable to such Meeting Fee Shares.
Generally, the Company will be allowed, at the date of issuance, to take a
deduction for federal income tax purposes in an amount equal to the amount of
ordinary income recognized by the director.
In addition, under the Internal Revenue Code, the grant of a nonqualified stock
option to a director has no tax effect on the Company or the director to whom it
is granted. Generally, the exercise of the stock option will result in ordinary
income to the option holder equal to the excess of fair market value of the
shares at the time of exercise over the option exercise price. If the option
holder pays cash to exercise the option, the holder's tax basis in the shares
received will be the aggregate exercise price paid by the holder plus the amount
of taxable income recognized upon exercise. Upon any subsequent disposition of
such shares, gain or loss will be capital gain or loss, and will be long-term if
such shares are held more than twelve or eighteen months after exercise.
Generally, the Company will be allowed, at the time of recognition of ordinary
income by the option holder, to take a deduction for federal income tax purposes
in an amount equal to such recognized ordinary income.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
EQUITY COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS OF
FIRST WESTERN BANCORP, INC. AND
FIRST WESTERN BANK, N.A.
-----------------------------------
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS
- ----------------- ------------ ---------------
<S> <C> <C>
Non-Employee Directors as a Group (9 persons)(1) $ 36,000(2) 9,000 options(3)
</TABLE>
- ---------
(1) In addition to these nine persons, there are 15 directors of FW Bank who
will be eligible to participate in the Directors' Plan.
(2) Reflects the dollar value of retainer fees to be received in the form of
cash or Retainer Fee Options as of the date of the 1998 Annual Meeting. The
amount of meeting fees payable under the Directors' Plan will depend on the
number of meetings attended and is not, therefore, determinable at this
time. Bank director retainer fees represent an additional $45,000.
(3) Reflects the number of Automatic Options to be received as of the date of
the 1998 Annual Meeting assuming that no eligible director elects to receive
any portion of his retainer or meeting fees in cash. Bank directors have
options to purchase an additional 15,000 shares.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE ADOPTION OF THE DIRECTORS' PLAN.
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<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the compensation for services rendered during the
years ended December 31, 1997, 1996 and 1995 paid by First Western or its
subsidiaries to the Chief Executive Officer and the four other most highly
compensated executive officers of First Western whose annual salary and bonus
exceeded $100,000 for the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMMON
-------------------------------- OTHER COMPENSATION STOCK
YEAR ENDED ANNUAL SECURITIES ALL OTHER OWNERSHIP
DECEMBER SALARY BONUS COMPENSATION UNDERLYING COMPENSATION (1), (6),
NAME, AGE AND PRINCIPAL POSITION (1) 31 (2) (3) (4) OPTIONS (5) (7), (8)
- ------------------------------------ ---------- ------ ----- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas J. O'Shane (50)
Chairman, President and 1997 $298,000 $160,920 $ -- 10,500 $88,457 214,294
Chief Executive Officer, 1996 281,000 94,837 -- -- 47,597
First Western 1995 266,500 119,925 -- 67,500 12,724
Robert H. Young (41)
Executive Vice President-Chief 1997 143,900 51,531 -- 3,750 16,705 41,637
Financial Officer, Secretary 1996 135,800 38,610 -- -- 11,397
and Treasurer, First Western 1995 130,800 41,312 -- 22,500 12,724
Richard L. Stover (55)
Executive Vice President- 1997 143,300 51,531 -- 3,750 -- 14,300
Chief Lending Officer 1996 22,897(9) 5,093 5,596 22,500 --
First Western 1995 -- -- -- -- --
Stephen R. Sant (51)
President and Chief 1997 137,000 49,697 -- 3,750 17,022 83,895
Executive Officer, FW Bank 1996 135,800 33,555 -- -- 11,497
and Executive Vice President- 1995 128,100 40,659 -- 22,500 12,724
Chief Operating Officer,
First Western
John A. Zercher (45)
Senior Vice President-Operations 1997 114,050 40,716 -- 1,800 14,511 58,628
and Information Systems, 1996 105,600 25,344 -- -- 9,838
First Western 1995 99,600 32,868 -- 16,875 11,192
</TABLE>
- ---------
(1) As of January 31, 1998.
(2) Includes salary only. Officers who are also Directors received no
compensation for acting as Directors or for attendance at Committee meetings
in 1997, except for Mr. Young, who as a director of First Western Investment
Services Co. received $600 in fees for attendance as director.
(3) Includes payments under the Incentive Compensation Plan, which are made in
cash as soon as practicable after the close of the fiscal year. Amounts
shown for 1997 include the amount of bonus accrued for 1997 as determined in
January 1998, and excludes the bonus paid in January 1997 for 1996.
(4) Noncash compensation, in the case of each individual for each of the three
years in the table, did not exceed the lesser of $50,000 or 10% of total
compensation, except for Mr. Stover, who in 1996 received a taxable personal
benefit of $786 for a company vehicle, and a country club membership for
$4,810.
(5) Includes 401(k) Profit-Sharing and Stock Bonus Plan contributions by First
Western, which includes a total of 416 shares (excluding forfeitures) of
Common Stock with a market value of $11,856 as of December 31, 1997. Messrs.
O'Shane, Young and Sant each received 105 shares, and Mr. Zercher received
101 shares. Also includes company contributions to the Supplemental
Executive Retirement Plan determined and made in 1997 on behalf of Messrs.
O'Shane, Young and Sant totaling $76,224 for 1996 and prior years.
(6) Includes shares of Common Stock owned by immediate families (spouses, minor
children and relatives sharing the same home) of the respective persons,
shares of Common Stock held in the 401(k) Profit-Sharing and Stock Bonus
Plan, and shares of Common Stock held by individual grantor trusts related
to the Supplemental Executive Retirement Plan.
-11-
<PAGE> 14
(7) Includes options to purchase shares of Common Stock which are presently
exercisable or exercisable within 60 days of January 31, 1998 as follows:
127,197 shares, Mr. O'Shane; 22,500 shares, Mr. Young; 10,800 shares, Mr.
Stover; 59,709 shares, Mr. Sant; and 14,625 shares, Mr. Zercher.
(8) Except for Mr. O'Shane, whose Common Stock beneficial ownership represents
1.86% of the total shares of Common Stock outstanding and options which are
exercisable within 60 days of January 31, 1998, no other executive officer
named in the table beneficially owns 1% or more of such total shares of
Common Stock.
(9) Mr. Stover became an executive officer on November 4, 1996.
PENSION PLAN
The following table shows annual pension benefits payable under the First
Western Bancorp, Inc. Pension Plan (the "Pension Plan") upon retirement at age
65, in various remuneration and years-of-service classifications, assuming the
election of a retirement allowance payable as a straight life annuity with
retirement on January 1, 1998. Remuneration for these purposes is the same as
the total of salary and bonus as disclosed in the Summary Compensation Table.
Annual benefits payable are not subject to any deduction for Social Security or
other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
REMUNERATION(1)(2) 15 20 25 30 35
- ------------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000............................. 22,500 30,000 37,500 45,000 52,500
175,000............................. 26,250 35,000 43,750 52,500 61,250
200,000............................. 30,000 40,000 50,000 60,000 70,000
225,000............................. 33,750 45,000 56,250 67,500 78,750
250,000............................. 37,500 50,000 62,500 75,000 87,500
300,000............................. 45,000 60,000 75,000 90,000 105,000
350,000............................. 52,500 70,000 87,500 105,000 122,500
400,000............................. 60,000 80,000 100,000 120,000 140,000
450,000............................. 67,500 90,000 112,500 135,000 157,500
500,000............................. 75,000 100,000 125,000 150,000 175,000
550,000............................. 82,500 110,000 137,500 165,000 192,500
</TABLE>
- ---------
(1) Section 401(a)(17) of the Internal Revenue Code contains an annual limit on
the amount of compensation covered for purposes of accruing benefits under
the Pension Plan. For 1997, this limit was $160,000. Since such limit is
subject to future adjustments, the benefit amounts shown in the table have
been calculated without regard to this limit.
(2) Thomas J. O'Shane, Robert H. Young, Richard L. Stover, Stephen R. Sant and
John A. Zercher have 25, 11, 1, 7 and 25 whole years of service under the
plan, respectively, as of January 31, 1998. All such persons are fully
vested in their accrued benefits as of January 31, 1998, with the exception
of Mr. Stover.
Mr. Stover, as part of his employment agreement, will be eligible to receive a
retirement benefit based upon a two times years of service multiple for each
actual year worked and credited under terms of the Pension Plan, provided his
employment equals or exceeds five consecutive years worked. The additional
multiple can not be funded through the Pension Plan, and is instead recorded as
an unfunded, nonqualified accrued liability by First Western.
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<PAGE> 15
OPTION GRANTS
The following table sets forth as to persons named in the Summary Compensation
Table additional information with respect to stock options granted during 1997,
including the potential realizable value from the stock options assuming the
options are exercised at the end of the option term and assuming 5% and 10%
annual rates of stock price appreciation during the option term:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------------- OF ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
NUMBER OF OPTIONS EXERCISE APPRECIATION FOR
SECURITIES GRANTED TO PRICE PER OPTION TERM
UNDERLYING OPTIONS EMPLOYEES SHARE EXPIRATION ---------------------------
NAME GRANTED(1),(2) IN 1997 ($/SHARE) DATE 5%(3) 10%(3)
- ---- ------------------ ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. O'Shane 10,500 22.4% $ 21.33 4/15/07 $140,805 $356,895
Robert H. Young 3,750 8.0 21.33 4/15/07 50,288 127,463
Richard L. Stover 3,750 8.0 21.33 4/15/07 50,288 127,463
Stephen R. Sant 3,750 8.0 21.33 4/15/07 50,288 127,463
John A. Zercher 1,800 3.8 21.33 4/15/07 24,138 61,182
</TABLE>
- ---------
(1) As adjusted for the August 15, 1997 three-for-two stock split, effected in
the form of a 50% stock dividend.
(2) The stock options for Mr. O'Shane were granted on April 15, 1997 and are
exercisable between December, 1997 and April 1, 2000. For the other named
officers, options will vest on April 1, 2000. These options are intended to
be incentive stock options. The exercise price per share, as adjusted for
the stock split, is $21.33 per share, which was equal to the fair market
value of the Common Stock at the date of grant. Fair market value was the
average of the high and low sales prices of the Common Stock on the date of
grant on the Nasdaq Stock Market, as adjusted for the recent stock split.
The exercise price may be paid in cash, in shares of Common Stock, or a
combination of cash and such shares. The options have a term of ten years.
(3) The 5% and 10% assumed annual rates of stock price appreciation do not
reflect actual changes in the fair market value of the Common Stock since
the date of grant. The information in the table is provided in accordance
with the rules of the Securities and Exchange Commission regarding the
disclosure of compensation of executive officers, and is not intended to
forecast possible future stock price appreciation, if any.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table sets forth the aggregated option exercises (as adjusted for
the August 1997 stock split) during the year ended December 31, 1997, and the
year-end value of options held by each of the named executive officers of First
Western in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED (1) UNEXERCISABLE (#) UNEXERCISABLE ($)(2)
- ---- ----------- ------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Thomas J. O'Shane -- $ -- 123,819/9,993 $ 2,367,098/$71,650
Robert H. Young 9,302 148,525 21,195/5,055 321,528/46,684
Richard L. Stover -- -- 5,400/20,850 58,050/210,713
Stephen R. Sant -- -- 54,962/8,497 1,162,329/98,900
John A. Zercher 6,901 126,158 14,625/1,800 221,861,/12,906
</TABLE>
- ---------
(1) Value realized for options exercised but not sold was determined based on
the average of the high and low price of the Common Stock on the day prior
to exercise minus the exercise price, multiplied by the number of shares
acquired (as adjusted for the August 1997 stock split). If shares were sold
simultaneously upon exercise, value realized was determined based upon the
sales price.
-13-
<PAGE> 16
(2) The value of unexercised in-the-money options is calculated by determining
the difference between the fair market value of the securities underlying
the options at year-end ($28.50 per share based on the closing price of the
Common Stock at year-end) and the exercise price of the options ($4.50 per
share for 1991-granted options, $13.33 per share for 1995-granted options,
$17.75 per share for 1996-granted options and $21.33 per share for
1997-granted options), multiplied by the number of underlying securities.
CHANGE IN CONTROL AGREEMENTS
Certain executive officers of the Company, including four named in the Summary
Compensation Table (Messrs. O'Shane, Young, Stover and Sant), have entered into
change in control agreements with the Company (the "Agreements"). The Agreements
operate only upon the occurrence of a "change in control" as described below.
Absent a "change in control," the Agreements do not require the Company to
retain the executives in its employ or to pay them any specified level of
compensation or benefits.
Each Agreement provides that if a change in control of the Company or any of its
bank subsidiaries (collectively, the "Subsidiary") occurs, the Company and the
Subsidiary will be obligated to continue to employ the executive during the time
period starting upon the occurrence of a change in control and ending three
years thereafter (or, if earlier, at the executive's early retirement date or
attainment of age 65) (the "Term of Employment"). The Agreement specifies the
compensation and benefits required to be provided to the executive during the
Term of Employment.
If, during the Term of Employment, the executive is discharged by the Company or
the Subsidiary without cause or resigns for good reason, then the executive
shall receive within 30 days of the date of termination a lump sum payment equal
to the present value of monthly payments, calculated using an appropriate
discount rate, from the date of termination until the earlier of (a) the date
that is 36 months after the change in control and (b) the executive's attainment
of age 65 (the "Calculation Period"), of (i) salary at a rate equal to the
highest salary in effect during the 12 months immediately preceding the change
in control or the date of termination and (ii) bonus at a rate equal to the
greater of the annual bonuses received during the three calendar years
immediately preceding the change in control or the date of termination.
If the executive is terminated during the Term of Employment for any reason
other than cause, then until the executive reaches or would have reached normal
retirement age, (a) the executive and/or his spouse will continue to receive
insurance and health care benefits equivalent to those in effect immediately
prior to the date of termination or the date of the change in control (whichever
is more favorable), subject to reduction to avoid duplication with benefits of a
subsequent employer, (b) at and after normal retirement age, health and life
insurance benefits equivalent to those afforded retired executives under
programs in effect immediately prior to the date of termination or the date of
the change in control (whichever is more favorable) and (c) the executive will
also receive supplemental retirement benefits equal to the extra pension
benefits he would have earned had employment been continued for the entire
Calculation Period.
Generally, and subject to certain exceptions, a "change in control" shall be
deemed to have occurred if (a) final regulatory approval is obtained for any
party to acquire securities of the Company and/or the Subsidiary representing
20% or more of the combined voting power of the Company's or the Subsidiary's
then outstanding securities; (b) there is a significant change in the Company's
or the Subsidiary's board of directors not approved by the incumbent board; or
(c) final regulatory approval is obtained for a plan of complete liquidation or
dissolution or sale of all or substantially all of the Company's or the
Subsidiary's assets or certain significant reorganizations, mergers and similar
transactions involving the Company or the Subsidiary.
EMPLOYMENT AGREEMENT
First Western entered into an at-will employment agreement with Richard L.
Stover on October 25, 1996. The agreement provides that Mr. Stover will receive
a base annual salary of $135,800 and normal employee benefits, that he will
participate in First Western's Incentive Compensation Plan, Stock Option Plan
and Supplemental Executive Retirement Plan and will receive a company automobile
and reimbursement for certain clubs' dues. The agreement provides for certain
benefits under the Pension Plan as described above.
-14-
<PAGE> 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of First Western (the
"Committee") determines the specific forms and levels of compensation for the
executive officers of First Western and administers the compensation plans of
First Western, subject to the approval of the Board of Directors. The Committee
is currently comprised of four members, all of whom are non-employee directors.
The discussion of compensation policies and practices set forth in this report
relates to compensation reported for fiscal year 1997.
COMPENSATION POLICIES
The compensation policies established and administered by the Committee are
intended to provide compensation to First Western's executive officers at
competitive levels in order to attract and retain qualified executive officers
and to award executive officers based on First Western's annual and long-term
performance. Executive compensation is generally set at levels that the
Committee believes to be within the mid-range for executive compensation for
bank holding companies which are comparable in size and performance to First
Western. The Committee views stock options and stock ownership by executive
officers as important components of performance-based compensation as the value
of stock options directly relates to the price of the Common Stock of First
Western and provides executive officers with an additional incentive to enhance
shareholder value. In January 1995 the Committee adopted a policy with respect
to executive compensation under Section 162(m) of the Internal Revenue Code. The
policy states that, in general, First Western will not adopt plans or pay
compensation to its key executives in excess of the deductible limits to First
Western specified under Section 162(m); however, it is recognized there may be
circumstances in which it is necessary or appropriate to pay compensation in
excess of such limits and First Western expressly reserves the right to
compensate executives in a manner it deems appropriate.
ELEMENTS OF EXECUTIVE COMPENSATION
Compensation of the executive officers of First Western and its subsidiaries
consists of the following three elements: base salary, cash payments under the
Incentive Plan and stock option awards under the Option Plan.
Base Salary. The Committee establishes base salaries for executive officers of
First Western by utilizing salary data obtained from a variety of sources,
including outside consultants and publicly available information. The companies
included in the survey information used by First Western are not necessarily the
same as those included in the peer group index referenced in the performance
graph included in this Proxy Statement under "Shareholder Return Performance
Graph." The Committee undertakes an annual review of the base salary level of
each executive officer of First Western, including the Chief Executive Officer.
It is the intention of the Committee that the executive officers of First
Western be paid base salaries that are approximately in the mid-range of base
salaries for executive officers at bank holding companies comparable in size and
performance to First Western. The Committee considers a variety of factors in
determining base salaries for individual executive officers, including among
others, the level of duties and responsibilities inherent in each individual's
position with First Western and the individual's performance of these duties,
First Western's financial performance, general economic conditions and
compensation trends in bank holding companies.
Incentive Plan. The Incentive Plan is intended to provide executive and other
officers of First Western and its subsidiaries with compensation tied to the
achievement of certain corporate, departmental and individual performance goals,
as approved by the Committee at the beginning of the year. If the goals approved
by the Committee are achieved, the incentive award added to the base salary paid
is intended to provide to each executive officer total cash compensation that
year in approximately the mid-range of the upper half of total cash compensation
paid to executive officers at bank holding companies comparable to First
Western. If the goals approved by the Committee are not achieved, the incentive
award would be reduced.
Corporate earnings goals, as measured by earnings per share, constitute a
significant component of each incentive award so that incentive awards are
directly dependent upon the achievement of corporate goals. The corporate
earnings component of an incentive award will be increased or reduced at a rate
equal to two and one-half times the percentage increase or shortfall, as the
case may be, in such goal. In addition to the corporate earnings goals,
individual goals for a particular year vary for each officer participating in
the Incentive Plan and are mainly based on the achievement of certain
predetermined departmental and individual goals for
-15-
<PAGE> 18
the particular fiscal year, including among others, goals related to the
following: the department's operating budget; goals of the business unit in
which the individual participant is performing the majority of his duties;
specific job-related goals; and individual performance. Past performance, peer
group performance and perceived future opportunities are considered when
establishing departmental and individual goals.
Incentive awards for each individual executive officer are determined as a
percentage of that individual's base salary. Such percentages vary with the
officer's position and responsibilities and range in amount from 25% to 45% of
base salary. The actual amount of each individual incentive award may be
modified by the Committee to recognize outstanding performance or additional
effort when certain goals may not have been achieved due to changing business
priorities or conditions, and also may be modified to reflect an unsatisfactory
performance by an individual despite the achievement of certain goals. No
payouts will be made to any participant if one or more of the following
conditions exist: (a) earnings of the Corporation are less than 60% of budgeted
earnings, (b) cash dividends are not at least equal to non-special cash
dividends paid in the prior year, or (c) the ratio of the allowance for possible
loan losses to nonaccrual loans is less than 85%. To further protect shareholder
interests, the aggregate amount of awards to all Plan Participants for a Plan
Year may not exceed 8% of First Western's pre-tax earnings. Incentive awards
earned, if any, are paid annually in cash as soon as practicable after the end
of each fiscal year.
Options. The grant of stock options is intended to provide long-term
performance-based compensation to the executive officers of First Western.
Options also are intended to provide executive officers with an incentive to
increase and promote shareholder value. Options have previously been granted to
individual executive officers of First Western based on the performance of each
individual and their contributions to First Western's long-term growth and
profitability. Options to purchase an aggregate of 232,560 shares of Common
Stock of First Western (as adjusted for stock dividends and splits) were granted
in 1991 to certain current executive officers of First Western. Options to
purchase 120,377 shares remain outstanding as of January 31, 1998. Additional
options to purchase 199,875 shares of Common Stock (as adjusted for stock
dividends and splits) were granted under the Option Plan as of January 16, 1995
to certain current key executives who are primarily responsible for earnings
performance and shareholder value. Options to purchase 199,875 shares remain
outstanding as of January 31, 1998. These options were granted with an option
price of $13.33 per share (as adjusted), which was higher than the fair market
value per share as of such date of $12.19 (as adjusted), with vesting terms of
six months to three years and a term of ten years. Options for 132,375 shares
are intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code and options for 67,500 shares are considered nonqualified
stock options. Options for 22,500 shares, intended to qualify as incentive stock
options, were granted at fair market value ($17.75) on November 4, 1996 to a new
executive officer which remain outstanding. Options to purchase 36,150 shares of
Common Stock were granted under the Option Plan as of April 15, 1997 to the same
group of officers, with an option price of $21.33 per share (as adjusted), all
of which remain outstanding, with vesting terms of six months to three years and
all of which are intended to qualify as incentive stock options. The Committee
will continue to review compensation through stock options.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The compensation of Thomas J. O'Shane, Chief Executive Officer of First Western,
is determined by the Committee based on the same criteria and elements of
compensation as the other executive officers of First Western. The Committee
believes that Mr. O'Shane's base salary of $298,000 for 1997 is consistent with
First Western's general compensation policies. The Committee believes that Mr.
O'Shane's current base salary is approximately at the mid-range of base salaries
for bank holding companies comparable to First Western, based on independent
compensation studies made available throughout the year to the Committee.
Incentive compensation is provided to Mr. O'Shane through his participation in
the Incentive Plan and is based on the achievement of specific performance goals
for a particular fiscal year as described above under "Incentive Plan." The
Committee may also modify an award under the Incentive Plan for Mr. O'Shane (or
any other executive officer) by considering additional factors believed to be
relevant in determining the incentive compensation of the Chief Executive
Officer for a particular fiscal year, such as the performance of other duties
that enhanced First Western's overall financial performance for a given year. A
significant portion of Mr. O'Shane's total compensation is dependent upon the
achievement of the corporate earnings goal as measured by earnings per share,
and thus, a significant portion of his total compensation is at risk. The
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<PAGE> 19
corporate earnings per share goal under the Incentive Plan for fiscal 1997 was
determined in January 1997. In January 1998, based on the measurement of
achieving the earnings per share goal under the Incentive Plan, the Committee
determined that Mr. O'Shane should receive an incentive award of $160,920 for
fiscal 1997. This award was increased from the prior year's $94,837 as First
Western more than fully achieved the earnings per share goal in 1997, primarily
due to reduced consumer loan losses and gains on sales of loans.
Mr. O'Shane participates in the Option Plan described above and was granted
options intended to qualify as incentive stock options to purchase an aggregate
of 111,627 shares of Common Stock of First Western (as adjusted for stock
dividends and splits) in 1991, of which 55,812 shares remain outstanding at an
exercise price of $4.50 per share. These options are fully vested and will
expire ten years after date of grant. On January 16, 1995, he was granted
options to purchase an additional 67,500 shares of Common Stock, all of which
are nonqualified and which are exercisable after six months for any time up to
ten years from the date of grant at an exercise price of $13.33 per share. These
options are included in the total grant of 199,875 options to all executives
noted above. On April 15, 1997, he was granted options to purchase an additional
10,500 shares of Common Stock, which are incentive stock options with an
exercise price of $21.33 that vest from six months through three years from the
date of grant. The grant of these options, as with the options granted to other
executive officers of First Western, is intended to provide Mr. O'Shane with a
long-term incentive to enhance and improve shareholder value.
The foregoing report has been furnished by the members of the Compensation
Committee of the Board of Directors.
Robert C. Duvall, Chairman
James M. Campbell
Harold F. Reed, Jr.
John W. Sant
-17-
<PAGE> 20
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Common Stock against the cumulative total return
of the Nasdaq Composite Market (U.S. Companies) and Nasdaq Bank Stocks for the
period of five years from December 31, 1992 through December 31, 1997.
<TABLE>
<CAPTION>
NASDAQ
Stock Market
Measurement Period First Western (U.S. NASDAQ
(Fiscal Year Covered) Bancorp, Inc. Companies) Bank Stocks
<S> <C> <C> <C>
12/31/92 100.000 100.000 100.000
12/31/93 102.7 114.8 114.0
12/30/94 99.9 112.2 113.6
12/29/95 152.5 158.7 169.2
12/31/96 150.0 195.2 223.4
12/31/97 250.3 239.5 377.4
</TABLE>
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
First Western Bancorp, Inc........... 100.0 102.7 99.9 152.5 150.0 250.3
Nasdaq Stock Market (U.S.
Companies)......................... 100.0 114.8 112.2 158.7 195.2 239.5
Nasdaq Bank Stocks................... 100.0 114.0 113.6 169.2 223.4 377.4
</TABLE>
The information in the graph was provided by The University of Chicago Graduate
School of Business--Center for Research in Security Prices. It assumes an
initial investment of $100 and reinvestment of dividends during the period
presented in the graph.
TRANSACTIONS WITH DIRECTORS,
NOMINEES, OFFICERS AND ASSOCIATES
To the knowledge of the management of First Western, no entity owns of record or
beneficially 5% or more of the outstanding Common Stock (11,178,474 shares) as
of January 31, 1998.
Certain directors, nominees and officers of First Western and its subsidiaries
and their associates were customers of the Banks during 1997. Transactions which
involved loans or commitments by the Banks were made in the ordinary course of
business and with substantially similar terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, First Western's directors, its executive
officers, and any persons holding more than ten percent of the Common Stock are
required to report their initial ownership of the Common Stock and any
subsequent changes in that ownership to the Securities and Exchange Commission
and NASDAQ. Specific due dates for these reports have been established and First
Western is required to disclose in this proxy statement any failure to file by
those dates during or for 1997. All of these filing requirements were satisfied
during 1997, except that one transaction during the month of May, 1997 for
Stephen R. Sant was not timely reported on Form 4, which was corrected by filing
a Form 4 in June, 1997. In making the foregoing disclosure, First Western has
relied solely on representations of its directors and executive officers and
copies of the reports that they have filed with the Commission.
-18-
<PAGE> 21
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as independent public accountants for First Western
and its subsidiaries for the year ended December 31, 1997. The Audit Committee
of the Board of Directors, at its February 24, 1998 meeting, recommended the
appointment of Deloitte & Touche LLP, independent public accountants to audit
the consolidated financial statements of First Western and its subsidiaries for
the year ending December 31, 1998. It is anticipated that this recommendation
will be acted upon and approved at the next regularly scheduled meeting of the
Board of Directors on April 21, 1998. Representatives of Deloitte & Touche LLP
will be present at the Annual Meeting and will be available to respond to
appropriate shareholder questions, and to make a statement if they desire to do
so.
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST TO ROBERT H. YOUNG, SECRETARY OF FIRST WESTERN (AT THE
ADDRESS SPECIFIED BELOW), BY ANY SHAREHOLDER WHOSE PROXY IS SOLICITED HEREBY,
FIRST WESTERN WILL FURNISH TO SUCH SHAREHOLDER WITHOUT CHARGE A COPY OF ITS 1997
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
TOGETHER WITH CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES THERETO.
SHAREHOLDER PROPOSALS
If any shareholder wishes to present a proposal at the 1999 Annual Meeting of
Shareholders, the proposal will be considered for inclusion in the Proxy
material only if received no later than November 20, 1998. Any such proposal
should be addressed to Robert H. Young, Secretary, P. O. Box 1488, New Castle,
PA 16103-1488.
ADDITIONAL INFORMATION
First Western knows of no other business to be presented at this time. If any
matters come before the meeting, the persons named in the Proxy will vote in
accordance with the recommendations of the Board. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY AS SOON AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON. If you do attend the meeting, you may then withdraw your
Proxy. In any event, you may revoke your Proxy prior to its exercise. The
revocation of a proxy will not be effective, however, until written notice of
the revocation has been given to the Secretary of First Western.
/s/ ROBERT H. YOUNG
--------------------------
Robert H. Young
Executive Vice President - Chief
Financial Officer, Secretary
and Treasurer
-19-
<PAGE> 22
DIRECTIONS TO THE NEW ENGLANDER
3009 WILMINGTON ROAD, NEW CASTLE, PA
South of New Castle
North on Route 60. Take the Mitchell Road exit. Proceed to stop light at Route
18. Turn right heading south on Route 18. Proceed approximately one mile and the
New Englander is on the right.
North of New Castle
South on Route 60. Take the Mitchell Road exit. Proceed to stop light at Route
18. Turn right heading south on Route 18. Proceed approximately one mile and the
New Englander is on the right.
East of New Castle
West on Route 422. Take the Route 422 bypass around New Castle. Proceed on Route
422 west bypass as it becomes Route 60 north. Take the Mitchell Road exit.
Proceed to stop light at Route 18. Turn right heading south on Route 18. Proceed
approximately one mile and the New Englander is on the right.
West of New Castle
Route 80 east to Route 60 south. Take the Mitchell Road exit. Proceed to stop
light at Route 18. Turn right heading south on Route 18. Proceed approximately
one mile and the New Englander is on the right.
or
East on Route 422 to Route 60 north. Take the Mitchell Road exit. Proceed to
stop light at Route 18. Turn right heading south on Route 18. Proceed
approximately one mile and the New Englander is on the right.
-20-
<PAGE> 23
APPENDIX A
EQUITY COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS OF
FIRST WESTERN BANCORP, INC.
AND FIRST WESTERN BANK, N.A.
ARTICLE I. GENERAL
1.01. Purpose. It is the purpose of the Plan to promote the interests of the
Company and its shareholders by attracting, retaining and providing an incentive
to Non-Employee Directors through the acquisition of a proprietary interest in
the Company and an increased personal interest in its continued successful
performance and progress. This purpose will be served by providing for the
issuance of shares of Common Stock and Options to Non-Employee Directors in lieu
of cash payments.
1.02 Adoption and Term. The Plan has been approved by the Boards effective as
of February 17, 1998 (the "Effective Date"). The Plan shall terminate without
further action upon the earlier of (a) the tenth anniversary of the Effective
Date and (b) the first date upon which no shares of Common Stock remain
available for issuance under the Plan.
1.03 Definitions. As used herein the following terms have the following
meanings:
(a) ANNUAL RETAINER AMOUNT shall mean the amount payable to Non-Employee
Directors as the annual retainer. Fees for service as chair of a Board committee
shall be considered part of the annual retainer for purposes of this Plan.
(b) AUTOMATIC OPTIONS shall have the meaning given to such term in Section 4.03.
(c) BANK means First Western Bank, N.A., and any successor thereto.
(d) BANK BOARD means the Board of Directors of the Bank.
(e) BOARD means either or both of the Company Board and the Bank Board.
(f) CHANGE IN CONTROL means any one of the following events:
(i) Upon the Company Board learning that an outside party, or group of
persons acting together in concert, has acquired 25% or more of the Common
Stock.
(ii) Upon the commencement of a tender offer to acquire 50% or more of
the Common Stock of the Company.
(iii) Upon the approval of the Company Board of a reorganization plan
under which the Company is to be merged, consolidated, or otherwise
combined (or its assets purchased) so that shareholders of the Company
following such reorganization shall own less than a majority of the shares
carrying voting rights in such surviving or acquiring corporation.
(iv) The Company Board approves any liquidation of substantially all
assets or any distribution of assets of the Company or of a subsidiary of
the Company when such assets being distributed have a value equaling or
exceeding 30% of the value of the assets of the Company prior to such
distribution.
(v) One-third or more of the membership of the Company Board consists
of members not recommended for membership by the Company or the Company
Board.
(g) CODE means the Internal Revenue Code of 1986, as amended. References to a
section of the Code shall include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
(h) COMMON STOCK means the common stock, par value $5.00 per share, of the
Company.
(i) COMPANY means First Western Bancorp, Inc., a Pennsylvania corporation, and
any successor thereto.
(j) COMPANY BOARD means the Board of Directors of the Company.
(k) COMPENSATION YEAR means each annual period during the term of this Plan
beginning on a Meeting Date and ending on the day immediately preceding the next
Meeting Date.
(l) CURRENT DIRECTOR shall have the meaning given to such term in Section
4.01(b).
A-1
<PAGE> 24
(m) DEFERRED COMPENSATION PLAN means the First Western Bancorp, Inc. Deferred
Compensation Plan for Directors, as the same may be amended from time to time.
(n) DIRECTOR means a member of the Company Board or the Bank Board.
(o) EFFECTIVE DATE shall have the meaning given to such term in Section 1.02.
(p) EMPLOYEE means any employee of the Company or an affiliate.
(q) EXERCISE PRICE means the exercise price of an Option.
(r) FAIR MARKET VALUE means, as of any given date, the fair market value of one
share of Common Stock, as determined by the Company Board in good faith based on
(a) the average between the high and the low prices of actual sales of Common
Stock on such date as reported on any stock exchange on which the Common Stock
is then listed or any quotation system approved by the National Association of
Securities Dealers then reporting sales of Common Stock, or if no actual sales
of Common Stock are reported on such date then (b) the average of the bid and
asked prices for Common Stock as reported as of such date on any stock exchange
on which the Common Stock is then listed or any quotation system approved by the
National Association of Securities Dealers then reporting such bid and asked
prices or, of there be no recent bid or asked prices then (c) as determined by
the Company Board in good faith pursuant to the principles of Section 422 of the
Code and Regulations issued thereunder based on trading information, appraisals,
or other financial data as the Company Board deems to be relevant.
(s) MEETING DATE means each date on and after the Effective Date on which the
Annual Meeting of the Company's shareholders occurs.
(t) MEETING FEES means the fees payable by the Company to Non-Employee Directors
for attendance at meetings of the Board or any committee thereof.
(u) MEETING FEE SHARES shall have the meaning given to such term in Section
4.02(a).
(v) NEW DIRECTOR shall have the meaning given to such term in Section 4.01(a).
(w) NON-EMPLOYEE DIRECTOR means a Director who is not an Employee.
(x) OPTION means an option to purchase Common Stock granted under this Plan. The
Options granted under the Plan shall not be incentive stock options within the
meaning of Section 422 of the Code.
(y) OPTION VALUE means the value of an Option as of a given date determined in
accordance with the Black-Scholes option valuation model or such other
recognized option valuation model used by the Company for financial accounting
purposes, but using such assumptions as the Company Board may determine to be
appropriate for the Plan, which assumptions need not be the same as those used
for purposes of the Company's financial statements.
(z) PLAN means this Equity Compensation Plan for Non-Employee Directors of First
Western Bancorp, Inc., as it may hereafter be amended from time to time.
(aa) RETAINER FEE OPTION shall have the meaning given to such term in Section
4.01(a).
1.04 NUMBER OF SHARES. Subject to adjustment in accordance with Section 5.01,
up to an aggregate of 200,000 shares of Common Stock may be issued under the
Plan. Such shares may be authorized and unissued shares or shares which shall
have been issued and subsequently reacquired by the Company.
ARTICLE II. ADMINISTRATION
2.01 The Company Board. The Plan shall be administered by the Company Board.
Subject to the provisions of the Plan, the Company Board shall have the
authority and sole discretion to interpret and construe the Plan, promulgate,
amend and rescind rules and regulations relating to the Plan and make all other
determinations necessary or advisable for its administration. Interpretation and
construction of any provision of the Plan by the Company Board shall be final
and conclusive.
ARTICLE III. PARTICIPATION
3.01 Participation. Each Non-Employee Director shall participate in the Plan on
the terms and conditions set forth herein.
A-2
<PAGE> 25
ARTICLE IV. RETAINER AND MEETING FEES AND AUTOMATIC OPTION GRANTS
4.01 Retainer Fees.
(a) New Directors. Each Non-Employee Director who first becomes a Non-Employee
Director on or after the Effective Date (a "New Director") shall receive no cash
retainer fee but instead will receive an annual retainer fee in the form of
Options ("Retainer Fee Options"). These annual grants of Retainer Fee Options
shall be made as of each Meeting Date. The Retainer Fee Options granted to each
such Non-Employee Director will have an Option Value as of the date of grant
equal to the Annual Retainer Amount for the applicable Compensation Year.
(b) Current Directors. Each person who was a Non-Employee Director immediately
prior to the Effective Date (a "Current Director") will receive Retainer Fee
Options as of each Meeting Date in the same manner as a New Director, except
that each Current Director may make a one-time election, at any time prior to
the 1998 Meeting Date, to receive as of each applicable Meeting Date all (but
not less than all) of his or her Annual Retainer Amount in the form of cash
rather than Retainer Fee Options; provided, however, that a Current Director,
after making such an election to receive cash, may revoke such election
prospectively and irrevocably and receive all (but not less than all) of his or
her future Annual Retainer Amounts in the form of Retainer Fee Options. Any cash
payable to a Non-Employee Director shall be subject to elective deferral by such
Director under the Deferred Compensation Plan.
(c) Retainer Fee Option Terms. The Exercise Price of each Retainer Fee Option
will equal the Fair Market Value of the underlying shares of Common Stock on the
date of grant of such Option. Retainer Fee Options will vest and become
exercisable in three substantially equal installments on the last day of June,
September and December immediately following the date of grant. Vesting shall
accelerate upon (i) the Non-Employee Director's retirement from the Board on or
after attaining age 65 or death or total and permanent disability while serving
as a Director or (ii) upon the occurrence of a Change in Control. Except as
provided in the immediately preceding sentence unvested Retainer Fee Options
shall expire upon termination of Board service for any reason, and vested
Options shall expire upon the earlier to occur of (A) ten years from the date of
grant of the Option; and (B) the later of (i) one year following the
Non-Employee Director's cessation of Board service for any reason and (ii) in
the case of a Non-Employee Director's retirement from the Board on or after
attaining age 65, three years from the date such Option first became
exercisable.
4.02 Meeting Fees.
(a) New Directors. Each New Director shall automatically receive all Meeting
Fees in the form of restricted shares of Common Stock ("Meeting Fee Shares").
The Meeting Fee Shares will be issued as of the end of each calendar quarter,
but shares will not be transferable by the Non-Employee Director for two years
from the date of issuance, except that gifts and other transfers to immediate
family members, or to trusts, partnerships or other estate planning vehicles for
the benefit of immediate family members, shall be permitted, provided that any
such transferee shall agree to be subject to the foregoing transfer
restrictions. The transfer restrictions shall automatically lapse (i) if the New
Director retires from Board service on or after attainment of age 65 or dies or
becomes totally and permanently disabled while serving as a Director or (ii)
upon the occurrence of a Change in Control. Meeting Fee Shares shall not be
subject to forfeiture. The number of Meeting Fee Shares issuable to a
Non-Employee Director as of each quarter-end shall be determined by dividing the
amount of Meeting Fees payable to such Director as of such date by a per share
Common Stock price equal to fifty percent (50%), or such greater percentage as
the Board may determine, of the Fair Market Value of the Common Stock on such
quarter-end issue date.
(b) Current Directors. Current Directors shall receive Meeting Fee Shares in
the same manner as a New Director, except that each Current Director may make a
one-time election, at any time prior to the 1998 Meeting Date, to receive all
(but not less than all) of his or her Meeting Fees in the form of cash rather
than Meeting Fee Shares; provided, however, that a Current Director, after
making such an election to receive cash, may revoke such election prospectively
and irrevocably and receive all (but not less than all) of his or her future
Meeting Fees in the form of Meeting Fee Shares. Any cash payable to a
Non-Employee Director shall be subject to elective deferral by such Director
under the Deferred Compensation Plan.
(c) Annual Election. Notwithstanding and in lieu of the provisions of Section
4.02(a) and (b), each Non-Employee Director who would otherwise be receiving
Meeting Fees in the form of Meeting Fee Shares with
A-3
<PAGE> 26
respect to a calendar year (i.e all New Directors and each Current Director who
did not elect to receive his or her Meeting Fees in cash) may irrevocably elect
prior to the commencement of such calendar year, or in the case of calendar year
1998, prior to the 1998 Meeting Date, to have all (but not less than all) of his
or her Meeting Fees for such calendar year deferred under the Deferred
Compensation Plan. If a Director makes such an election, the Company shall
credit to such Director under the Deferred Compensation Plan as of the last day
of each calendar quarter during such year a number of shares of Common Stock
equal to the number of Meeting Fee Shares that would have been issued to such
Director but for such deferral election.
4.03 Automatic Option Grants. Each New Director will receive an automatic
Option grant for 1,000 shares of Common Stock, effective as of his or her first
date of Board service ("Automatic Options"). The Exercise Price of each
Automatic Option will equal the Fair Market Value of the underlying shares of
Common Stock on the date of grant of the Option. Automatic Stock Options will
vest in three substantially equal installments on the first, second and third
anniversaries of the date of grant. Vesting will accelerate upon (a) the
Participant's retirement from the Board on or after attainment of age 65 or
death or total and permanent disability while serving as a director or (b) the
occurrence of a Change in Control. A Current Director shall receive a grant of
Automatic Options, as of the 1998 Meeting Date, only if such Current Director
does not elect to receive any portion of his or her Retainer Fees or Meeting
Fees in cash pursuant to Sections 4.01(b) and 4.02(b). Unvested Automatic Stock
Options shall expire upon termination of Board service for any reason and vested
options shall expire upon the earlier to occur of (A) ten years from the date of
grant of the option; or (B) the later of (i) one year following the Non-Employee
Director's cessation of Board service for any reason and (ii) in the case of a
Non-Employee Director's retirement from the Board on or after attaining age 65,
three years from the date such Option first became exercisable.
4.04 Exercise of Options. The Exercise Price for each Option shall be paid in
full upon exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order); provided, however, that in lieu of
such cash the person exercising the Option may pay the Exercise Price in whole
or in part by delivering to the Company shares of Common Stock having a Fair
Market Value on the date of exercise of the Option equal to the Exercise Price
for the shares being purchased; except that (i) any portion of the Exercise
Price representing a fraction of a share shall in any event be paid in cash and
(ii) no shares of the Common Stock which have been held for less than six months
may be delivered in payment of the Exercise Price of an Option. The date of
exercise of an Option shall be determined under procedures established by the
Company Board, and as of the date of exercise the person exercising the Option
shall be considered for all purposes to be the owner of the shares with respect
to which the Option has been exercised.
4.05 Options Non-Transferable. No Option shall be transferable by a
Non-Employee Director otherwise than by will, or if the holder dies intestate,
by the laws of descent and distribution of the state of domicile of the Non-
Employee Director at the time of death. All Options shall be exercisable during
the lifetime of the Non-Employee Director only by the Non-Employee Director or
the his or her guardian or legal representative.
ARTICLE V. MISCELLANEOUS
5.01 Adjustments Upon Changes in Common Stock.
(a) If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock set forth in Section 1.04, for each share of the
Common Stock subject to any then outstanding Option, and for each share of the
Common Stock which may be issued under the Plan but which is not then subject to
any outstanding Option, the number and kind of shares of stock or other
securities into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchangeable.
(b) In case of any adjustment or substitution as provided for in this Section
5.01, the aggregate Exercise Price for all shares subject to each then
outstanding Option prior to such adjustment or substitution shall be the
aggregate option price for all shares of stock or other securities (including
any fraction) to which such shares shall have been adjusted or which shall have
been substituted for such shares. Any new Exercise Price per share shall be
carried to at least three decimal places with the last decimal place rounded
upwards to the nearest whole number.
A-4
<PAGE> 27
(c) No adjustment or substitution provided for in this Section 5.01 shall
require the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.
5.02 Award Agreements. Each grant of Options and issuance of Meeting Fee Shares
under the Plan shall be evidenced by a written agreement between the
Non-Employee Director and the Company in such form as the Company Board shall
approve from time to time.
5.03 Amendment and Termination. The Company Board shall have complete power and
authority to amend and/or terminate the Plan at any time; provided, however,
that any such amendment or termination shall not, without the consent of a
Director reduce the Director's rights with respect to amounts previously earned
hereunder.
5.04 Requirements of Law. The issuance of Common Stock under the Plan shall be
subject to all applicable laws, rules and regulations and to such approval by
governmental agencies as may be required. Stock certificates issued hereunder
shall bear such restrictive legends as the Company Board may deem necessary or
appropriate.
5.05 No Fractional Shares. Notwithstanding any other provision of this Plan to
the contrary, no fractional Meeting Fee Shares or fractional Options shall be
awarded; all fractional shares shall be rounded up to the next highest whole
share.
5.06 No Guarantee of Membership. Nothing in the Plan shall confer upon a
Non-Employee Director any right to continue to serve as a Director.
5.07 Rights as Shareholders. Persons receiving awards under this Plan shall
have no rights as Shareholders of the Company unless and until certificates for
shares of Common Stock are issued to such persons.
5.08 Construction. Words of any gender used in the Plan shall be construed to
include any other gender, unless the context requires otherwise.
A-5
<PAGE> 28
FWBI-PS-98
<PAGE> 29
FIRST WESTERN BANCORP, INC.
CORDIALLY INVITES YOU
TO ATTEND THE
1998 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 21, 1998
10:30 A.M.
THE NEW ENGLANDER
3009 WILMINGTON ROAD
NEW CASTLE, PENNSYLVANIA
IN ADDITION TO REGULAR BUSINESS,
LUNCH WILL BE SERVED.
PLEASE R.S.V.P. BY APRIL 14, 1998
TO LINDA M. SPINELLI,
FIRST WESTERN BANCORP, INC.
(800) 696-2572
WE LOOK FORWARD TO SEEING YOU ON APRIL 21ST.
PWS82 5 DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS.
NOMINEES FOR THREE-YEAR TERM: Wendell H. Boyd, Robert C. Duvall FOR AGAINST ABSTAIN
and Louis J. Kasing, Jr. 2. APPROVAL OF DIRECTOR
NOMINEE FOR ONE-YEAR TERM: John W. Sant. EQUITY COMPENSATION PLAN, / / / / / /
FOR WITHHOLD as described in the enclosed
/ / ALL / / FROM ALL Proxy Statement.
NOMINEES NOMINEES
3. OTHER BUSINESS. The proxies shall vote on any other
/ / __________________________________________ business properly brought before the meeting and any
For all nominees except as noted above adjournment thereof in accordance with the
recommendations of management of First Western.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
Please sign EXACTLY as your name appears hereon. When
signing as executor, trustee, etc. or as officer of a
corporation, give full title as such. For joint accounts,
please obtain both signatures.
Signature: ____________________________________ Date: ________________ Signature: ___________________________ Date: _______________
</TABLE>
<PAGE> 30
PWS82 2 DETACH HERE
PROXY
FIRST WESTERN BANCORP, INC.
NEW CASTLE, PENNSYLVANIA
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 21, 1998
The undersigned hereby appoints James M. Campbell, Floyd H. McElwain and
Thomas J. O'Shane and each of them, with full power of substitution in each, as
proxies to represent the undersigned and to vote all shares of Common Stock of
First Western which the undersigned would be entitled to vote if personally
present and voting at the Annual Meeting of First Western's shareholders to be
held on April 21, 1998 at 10:30 a.m. (local time), at the New Englander, 3009
Wilmington Road, New Castle, Pennsylvania 16105, and at any adjournment or
adjournments thereof, upon all matters coming before the meeting. Said proxies
are directed to vote as set forth on the reverse side and, in their discretion,
upon such other matters as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST
WESTERN. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES, FOR APPROVAL OF THE DIRECTOR EQUITY COMPENSATION PLAN AND FOR
ANY OTHER BUSINESS IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
