SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROGRESS FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
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:
_____________________________________________________________________________
/_/ 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: _____________________________________________________________
<PAGE>
PROGRESS FINANCIAL CORPORATION
4 SENTRY PARKWAY, SUITE 230
P.O. BOX 3036
BLUE BELL, PA 19422-0764
(610) 825-8800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of Progress
Financial Corporation will be held at the Plymouth Country Club, Plymouth and
Belvoir Roads, Norristown, Pennsylvania, on Tuesday, May 6, 1998 at 9:00 a.m.
for the following purposes:
1. To elect four directors for a term of three years or until their successors
have been elected and qualified.
2. To approve the proposal to adopt an amendment to the Company's Certificate
of Incorporation to increase the authorized shares of common stock.
3. To amend the 1993 Stock Incentive Plan to increase the shares authorized
under the Plan.
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year ending December 31,1998; and
5. To transact such other business as may properly come before the meeting and
all adjournments thereof.
Stockholders of record at the close of business on March 6, 1998 are
entitled to notice of and to vote at the meeting and all adjournments thereof.
A copy of the Company's Annual Report for 1997 is enclosed. The Annual
Report is not to be regarded as proxy solicitation material.
BY ORDER OF
THE BOARD OF DIRECTORS
Eric J. Morgan
Corporate Secretary
Blue Bell, Pennsylvania
April 8, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
PROGRESS FINANCIAL CORPORATION
4 SENTRY PARKWAY, SUITE 230
P.O. BOX 3036
BLUE BELL, PA 19422-0764
(610) 825-8800
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1998
INTRODUCTORY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Progress Financial Corporation (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company to be held on May 6, 1998 at 9:00 a.m., at the Plymouth Country Club,
Plymouth and Belvoir Roads, Norristown, Pennsylvania, and at any adjournment or
adjournments thereof. The approximate date on which this Proxy Statement and the
accompanying Proxy are to be mailed to stockholders is April 8, 1998.
At the Annual Meeting, stockholders will be asked to elect four directors
to serve for three year terms. William O. Daggett, Jr., H. Wayne Griest, Joseph
R. Klinger, William L. Mueller, each of whom is a current director of the
Company will each serve for terms expiring at the Company's 2001 Annual Meeting.
In addition, stockholders will be asked to adopt an amendment to the Company's
Certificate of Incorporation to increase the authorized shares of common stock;
to amend the amended and restated 1993 Stock Incentive Plan ("Stock Incentive
Plan") to increase shares authorized under the Plan; to ratify the appointment
of Coopers & Lybrand L.L.P. as the Company's independent accountants for the
year ending December 31,1998; and to transact such other business as may
properly come before the meeting and all adjournments thereof.
The accompanying proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders of the Company at the time
and place, and for the purposes, set forth above. The proxy solicited hereby, if
properly signed and returned to the Company and not revoked before it is voted,
will be voted in accordance with the instructions contained therein. If no
instructions are given, each proxy received will be voted "FOR" the slate of
directors nominated by the Board of Directors as described herein, "FOR" the
proposal to adopt an amendment to the Company's Certificate of Incorporation to
increase the authorized shares of common stock, "FOR" the proposal to amend the
Stock Incentive Plan to increase shares authorized under the Plan, "FOR" the
appointment of Coopers & Lybrand L.L.P. as the Company's independent accountants
for the year ending December 31,1998, and "FOR" any other matters as may
properly come before the meeting.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by: (i) filing with the Company written notice thereof
(Attention: Eric J. Morgan, Corporate Secretary, Progress Financial Corporation,
4 Sentry Parkway, Suite 230, P.O. Box 3036, Blue Bell, Pennsylvania 19422-0764);
(ii) submitting a duly executed proxy bearing a later date; or (iii) appearing
at the Annual Meeting and giving the Company notice of his or her intention to
vote in person. Proxies solicited hereby may be exercised only at the Annual
Meeting and any adjournments thereof and will not be used for any other meeting.
Only stockholders of record at the close of business on March 27, 1998 will
be entitled to receive notice of and to vote at the Annual Meeting. On the
record date, there were 4,165,163 shares of Common Stock, par value $1.00 per
share ("Common Stock") of the Company issued and outstanding and held by
approximately 1,500 holders of record, and the Company had no other class of
equity securities outstanding. Each share of Common Stock entitles the holder to
one vote, and votes may not be voted cumulatively with respect to the election
of directors. A majority of the shares of Common Stock entitled to vote, present
in person or represented by proxy, will constitute a quorum for purposes of the
meeting.
<PAGE>
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. The affirmative vote of a majority of the total votes cast at the
Annual Meeting is required for approval of the proposal to amend the Stock
Incentive Plan. The affirmative vote of the holders of a majority of the total
votes eligible to be cast at the Annual Meeting is required to approval the
proposal to amend the Certificate of Incorporation to increase the authorized
shares of common stock. Abstentions will be counted for purposes of determining
the presence of a quorum at the Annual Meeting. Abstentions will not be counted
as votes cast and, thus, will have no effect on the plurality vote for the
election of directors or the proposals to amend the Stock Incentive Plan and to
ratify the appointment of the Company's independent accountants. Because of the
required vote, abstentions on the proposal to amend the Certificate of
Incorporation will have the same effect as a vote against the proposal. Under
rules applicable to broker-dealers, all of the proposals to be considered at the
Annual Meeting are considered "discretionary" items upon which brokerage firms
may vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions and, thus, there will be "broker non-votes."
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors shall consist of no fewer than seven nor more than twenty one members,
the exact number to be fixed from time to time by resolution of the Board of
Directors, and shall be divided into three classes as nearly equal in number as
possible. The members of each class are to be elected for a term of three years
and until their successors are elected and qualified. One class of directors is
to be elected annually except, in the event of a change in the number of or
composition of the Board of Directors, directors may be elected to more than one
class in order to more nearly achieve equality in the classes. By affirmative
vote of a majority of the Board of Directors, a resolution was adopted which
presently fixes the number of the members of the Board at eleven.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the four nominees listed below. If
any person named as nominee should be unable or unwilling to stand for election
at the time of the Annual Meeting, the proxies will vote for a replacement
nominee or nominees recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why any of the persons listed below may
not be able to serve as a director if elected.
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR AND DIRECTORS
WHOSE TERM CONTINUES
The following tables set forth certain information regarding each nominee
for election, including the principal occupations of such persons during at
least the past five years and the number and percent of shares of Common Stock
beneficially owned by such persons as of March 6, 1998. No nominee for director
or director is related to any other nominee for director or director or
executive officer of the Company by blood, marriage or adoption, and there was
no arrangement or understanding pursuant to which any of the nominees for
director or director was selected as a nominee for director or director.
NOMINEES FOR DIRECTOR FOR A THREE YEAR TERM
<TABLE>
<CAPTION>
Director Amount of Common
of Stock Beneficially
Principal Occupation During At Least the Past Company Term Owned as of
Name Age Five Years Since Expires March 6, 1998(1)
---- --- --------------------------------------------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C>
William O. Daggett, Jr. 57 Chairman of the Board of NABCO; Managing Partner 1990 2001 98,028(2.35%)(2)
of Kistler-Tiffany Companies, a firm engaged in
financial and estate planning and employee
benefits in Wayne, Pennsylvania. Also, President,
Benefit Designs, Inc.; and Vice President, Group
Brokerage Associates, Inc.
H. Wayne Griest 49 Chairman and CEO of Progress Realty Advisors, 1996 2001 20,075(3)
Inc. January 1996. Former President of the Lee
Financing Group, Inc. in Wayne, Pennsylvania
from July 1986 until November 1995.
Joseph R. Klinger 55 Principal of KMR Management, Inc., a management 1992 2001 9,298(4)
consulting company in Glenside, Pennsylvania.
William L. Mueller 46 Attorney/Partner with the law firm Brandt, 1990 2001 90,524(2.14%)(5)
Haughey, Penberthy, Lewis & Hyland in
Moorestown, New Jersey since December 1996.
Former attorney with Clark, Ladner, Fortenbaugh
and Young in Cherry Hill, New Jersey from
November 1987 until November 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE ABOVE NOMINEES.
</TABLE>
<PAGE>
MEMBERS OF BOARD CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Director Amount of Common
of Stock Beneficially
Principal Occupation During At Least the Past Company Term Owned as of
Name Age Five Years Since Expires March 6, 1998(1)
---- --- --------------------------------------------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C>
John E. F. Corson 57 Consultant and President of Corson Investments, 1991 1999 13,798(6)
a group of family holding companies in Plymouth
Meeting, Pennsylvania.
Donald F. U. Goebert 61 Chairman of the Board of Adage, Inc., a wireless 1987 1999 200,016(4.75%)(7)
communications firm in West Chester, Pennsylvania
Paul M. LaNoce 38 President of DAR Industrial Products, Inc., an 1991 1999 35,348(8)
industrial manufacturer in Philadelphia,
Pennsylvania
Janet E. Paroo 43 Chief Operating Officer of Global Health Group, 1996 1999 24,687(9)
Inc., a health care company in West Conshohocken,
Pennsylvania involved with the development and
management of health care facilities, systems and
programs primarily in South East Asia and India
since 1995. Banker for Meridian Bank in
Philadelphia, Pennsylvania from 1986 to 1995.
A. John May, III 42 Partner in the law firm Pepper, Hamilton & 1993 2000 15,280(10)
Scheetz in Philadelphia, Pennsylvania.
Charles J. Tornetta 67 President of Tornetta Realty Corporation, 1991 2000 65,806(1.57%)(11)
a real estate broker in Norristown,
Pennsylvania. Also, President of
Commonwealth Insurance Agency.
W. Kirk Wycoff 40 Chairman, President and Chief Executive 1991 2000 346,005(7.86%)(12)
Officer of the Company and the Bank.
</TABLE>
(1) Unless otherwise indicated, the number of shares owned is less than 1% of
the issued and outstanding Common Stock of the Company.
(2) Includes 79,230 shares owned by companies of which Mr. Daggett is a
director, officer and 10% stockholder and 12,500 common stock warrants and
6,298 shares subject to stock options, in each case which are exercisable
within 60 days of March 6, 1998.
(3) Includes 4,411 shares subject to stock options which are exercisable within
60 days of March 6, 1998.
(4) Includes 6,298 shares subject to stock options which are exercisable within
60 days of March 6, 1998.
(5) Includes 60,226 shares held jointly by Mr. Mueller with or for the benefit
of certain family and 24,000 common stock warrants and 6,298 shares subject
to stock options, in each case which are exercisable within 60 days of
March 6, 1998.
(6) Includes 6,298 shares subject to stock options which are exercisable within
60 days of March 6, 1998
(7) Includes 143,718 shares owned by companies of which Mr. Goebert is a
director, officer and 10% stockholder and 50,000 common stock warrants and
6,298 shares subject to stock options, in each case which are exercisable
within 60 days of March 6, 1998.
(8) Includes 6,298 shares subject to stock options which are exercisable within
60 days of March 6, 1998.
(9) Includes 2,887 shares subject to stock options which are exercisable within
60 days of March 6, 1998.
(10) Includes 2,000 shares held jointly by Mr. May with or for the benefit of
certain family members and 2,887 shares subject to stock options, in each
case which are exercisable within 60 days of March 6, 1998.
(11) Includes 25,000 common stock warrants and 6,298 shares subject to stock
options, in each case which are exercisable within 60 days of March 6,
1998.
(12) Includes 12,000 shares held jointly by Mr. Wycoff with or for the benefit
of certain family members and 12,500 common stock warrants and 235,050
shares subject to stock options, in each case which are exercisable within
60 days of March 6, 1998.
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY AND ITS COMMITTEES
The Board of Directors of the Company held eight meetings during 1997. Each
incumbent director of the Company attended no fewer than 75% of the aggregate
number of meetings of the Company's Board of Directors and all committees of the
Company's Board on which he or she served during 1997.
Nominations for members of the Board of Directors of the Company are made
by the Board of Directors or by any stockholder entitled to vote at the Annual
Meeting. Section 8.4(d) of the Company's Certificate of Incorporation sets forth
the procedures which stockholders must follow in order to make nominations for
election to the Board of Directors. In general, such nominations must be
submitted in writing to the Company at least 90 days prior to the date of the
Annual Meeting. The Company is not required to include such nominations in its
proxy statement. The Board of Directors has determined that if any stockholder
properly makes such a nomination, the ballots provided for use by stockholders
at the Annual Meeting will bear the name of such nominee or nominees.
Listed below are the committees of the Board of Directors, along with
directors who are serving as members of each committee in 1998.
The Audit Committee of the Company and the Bank recommends to the Board
independent auditors to perform audit and non-audit services, reviews the scope
and results of such services, reviews with management and the independent
auditors the systems of internal control and audit, assures adherence in
accounting and financial reporting to generally accepted accounting principles,
and performs such other duties deemed appropriate by the Board of Directors. The
Audit Committee met four times in 1997. For 1998, the following Board members
are serving on the Audit Committee: William O. Daggett, Jr., Chairman, John E.
F. Corson and Paul LaNoce.
The Board of Directors, except for Mr. Wycoff, determines compensation for
executive officers and participates on the Stock Compensation Committee. They
administer and award grants under the Company's stock benefit plans. No other
member of the Board, except Mr. Griest, is a current or former officer or
employee of the Company or its subsidiaries.
The Executive Committee of the Company has been established for 1998 to
make decisions on acquisitions, investments, and other Board actions between
Board meetings. This committee will also act as the Compensation and Nominating
Committees going forward. For 1998, the following Board members are serving on
the Executive Committee: Joseph R. Klinger, Chairman, Paul M. LaNoce, William O.
Daggett, Jr. and Charles J. Tornetta.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
In addition to the Board of Directors who beneficially own more than 5% listed
under, "Members of Board Continuing in Office", the following table sets forth
certain information relating to the only persons known to the Company to be the
beneficial owners of 5% or more of the Company's Common Stock as of March 6,
1998, and the amount of Common Stock of the Company held by all directors and
executive officers of the Company as a group as of such date.
<TABLE>
<CAPTION>
Amount of Common Stock Percent
Name and Address of Beneficially Owned of Common
Beneficial Owner as of March 6, 1998 Stock
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wellington Management 269,250 6.09%
Company, LLP
75 State Street
Boston, Massachusetts 02109
Directors and executive 990,038 (1) 18.64%
officers of the Company as a
group (14 persons)
</TABLE>
(1) Includes 12,000 shares which are held jointly by Mr. Wycoff with or for the
benefit of certain family members, 79,230 shares which are owned by
companies of which Mr. Daggett is a director, officer or 10% stockholder,
143,718 shares owned by companies of which Mr. Goebert is a director,
officer or 10% stockholder and 60,226 shares held jointly by Mr. Mueller
with or for the benefit of certain family members. Also includes 314,469
shares subject to stock options and 124,000 common stock warrants held by
the group, in each case which are exercisable within 60 days of March 6,
1998.
<PAGE>
EXECUTIVE COMPENSATION AND TRANSACTIONS
EXECUTIVE COMPENSATION
The following table sets forth a summary of certain information concerning
the compensation awarded to or paid by the Company to the following executive
officers of the Company for services rendered in all capacities during the last
three fiscal years. No other executive officer of the Company received annual
compensation in excess of $100,000 during the last fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------------------- ------------------------
Awards Payouts
------------------------
Other
Base Annual LTIP All Other
Salary Bonus Compensation Options Options Compensation
Name & Principal Position Year (1) (2) (3) (4) (5) (6)
- ------------------------- ---- ------ ----- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. Kirk Wycoff 1997 $280,000 $75,981 -- 105,000 N/A $3,971
Chairman, President and 1996 265,000 63,923 -- 37,800 N/A 4,751
Chief Executive Officer 1995 235,420 9,181 -- -- N/A 3,204
H. Wayne Griest (6) 1997 $120,000 -- -- 2,625 N/A $3,318
Chairman and Chief 1996 115,000 $ 5,975 -- 5,250 N/A 2,521
Executive Officer of
Progress Realty
Advisors, Inc.
Frederick E. Schea 1997 $100,000 $13,095 -- 2,625 N/A $2,796
Senior Vice President 1996 87,692 -- -- 10,500 N/A 1,863
and Chief Financial
Officer
Eric J. Morgan 1997 $ 99,826 $15,085 -- 7,350 N/A $2,954
Senior Vice President 1996 91,927 15,085 -- 1,575 N/A 2,742
1995 87,550 1,707 -- 7,875 N/A 2,512
</TABLE>
(1) Includes amounts deferred pursuant to the Company's 401(k) Profit Sharing
Plan, which generally allows employees to defer up to 12% of their
compensation, subject to applicable limitation set forth in the Internal
Revenue Code.
(2) Bonuses are payable in 1998 based on 1997 performance objectives.
(3) Does not include amounts attributable to miscellaneous benefits received by
the named executive officers. In the opinion of management of the Company,
the cost to the Company to providing such benefits to any individual
executive officer during the year ended December 31, 1997 did not exceed
the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual.
(4) Represents options granted pursuant to the Company's Stock Incentive Plan.
(5) The Company does not have a long-term incentive program as of December 31,
1997.
(6) For 1997, consists of employer contributions made by the Company pursuant
to the 401(k) profit sharing plan and allocations pursuant to the Company's
Employee Stock Ownership Plan ("ESOP"). Employer contributions pursuant to
the 401(k) was $0,000, $0,000, $0,000 and $0,000, respectively for Messrs.
Wycoff, Griest, Schea and Morgan and allocations pursuant to ESOP was
$0,000, $0,000, $0,000 and $0,000, respectively.
(7) Effective January 1996, Mr. Griest joined the Company. Previously Mr.
Griest served as a consultant to Progress Realty Advisors, Inc. and
received $25,308 in 1995 for such services.
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information concerning individual
grants of stock options pursuant to the Company's Amended and Restated 1993
Stock Incentive Plan awarded to the named executive officers during the year
ended December 31, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE LAST FISCAL YEAR
Individual Grants
% of Total Options
Granted to Expiration
Name Options Granted Employees Exercise Price (1) Date
---- --------------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C>
W. Kirk Wycoff (2) 105,000 65.57% $7.92 January 2, 2007
H. Wayne Griest (3) 2,625 1.64% 7.86 May 15, 2007
Frederick E. Schea (4) 2,625 1.64% 7.86 May 15, 2007
Eric J. Morgan (5) 7,350 4.59% 7.86 May 15, 2007
</TABLE>
(1) The exercise price was based on the market price of the Common Stock on the
date of the grant.
(2) In January 1997, the Stock Compensation Committee granted Mr. Wycoff
incentive stock options to purchase 105,000 shares of Common Stock. The
award vests at a rate of 50% on April 1, 1997, 25% on April 1, 1998 and
1999.
(3) In May 1997, the Stock Compensation Committee granted Mr. Griest incentive
stock options to purchase 2,625 shares of Common Stock. The award vests at
a rate of 34% on May 15, 1998, 33% on May 15, 1999 and 2000.
(4) In May 1997, the Stock Compensation Committee granted Mr. Schea incentive
stock options to purchase 2,625 shares of Common Stock. The award vests at
a rate of 34% on May 15, 1998, 33% on May 15, 1999 and 2000.
(5) In May 1997, the Stock Compensation Committee granted Mr. Morgan incentive
stock options to purchase 7,350 shares of Common Stock. The award vests at
a rate of 34% on May 15, 1998, 33% on May 15, 1999 and 2000.
The following table sets forth certain information concerning exercises of
stock options by the named executive officers the year ended December 31, 1997
and options held at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
Number of Unexercised Options At Value of Unexercised Options At
Year End Year End (1)
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Kirk Wycoff 25,000 $171,484 318,800 26,250 $3,720,593 $225,225
H. Wayne Griest -- -- 4,411 3,464 47,328 34,467
Frederick E. Schea -- -- 6,143 6,982 66,831 74,079
Eric J. Morgan -- -- 14,054 5,371 161,764 47,643
</TABLE>
(1) Based on a per share market price of $16.50 at December 31, 1997.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The entire Board of Directors, except for Mr. Wycoff, establishes the
policy for compensation of executive officers of the Company. The Stock
Compensation Committee review's the Company's Key Employee Stock Compensation
Program and recommends to the Board changes or additions to this program. The
Committee and the Board members establishing executive officer compensation are
composed entirely of outside directors who are not eligible to participate in
the plans over which they have authority.
The overall goal of the Company's compensation policy is to motivate,
reward and retain its key executive officers. The Board believes this is best
accomplished through an appropriate mix of competitive base salaries, bonus and
stock incentives.
The Board considers the following in determining base salary levels:
1. The amount of responsibility the executive officer has, experience and the
number of years in office, and
2. Compensation levels of corresponding positions at other thrift companies of
similar size within the Mid-Atlantic region. For 1997, Mr. Wycoff's salary
was near the average of comparative thrift companies and commercial banks
with asset sizes approximating that of the Company and the Bank based on the
1997 executive compensation survey prepared by SNL Securities.
The Board grants bonuses to executive officers, including the Chief
Executive Officer, based upon the degree of attainment of performance objectives
for the year. The performance objectives include net interest income,
non-interest income, non-interest expense and net income. For 1997, Mr. Wycoff
did not receive the maximum bonus payment because all maximum performance goals
were not met. Positive achievements for the year included loan growth of 29.41%,
growth in core business and consumer deposits, repositioning of deposit
services, and the start up of Procall Teleservices, Inc.
John E. F. Corson Paul M. LaNoce
William O. Daggett, Jr. A. John May, III
Donald F. U. Goebert William L. Mueller
H. Wayne Griest Janet E. Paroo
Joseph R. Klinger Charles J. Tornetta
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and the Bank (the "Employers") have entered into an employment
agreement with W. Kirk Wycoff which provides for his employment for a period of
three years with provisions for automatic one-year extensions unless sooner
terminated by death, disability or termination for cause. The employment
contract provides for a base salary, bonus plan, and entitles Mr. Wycoff to
participate in all benefit plans and programs available to executive officers.
The employment agreement is terminable with or without cause by the
Employer or Mr. Wycoff. Mr. Wycoff shall have no right to compensation or other
benefits pursuant to the employment agreement for any period after voluntary
termination or termination by the Employer for cause, disability, retirement or
death, provided, however, that if the employment agreement is terminated by the
Employer other than for cause, disability, retirement or death or by Mr. Wycoff
following a change in control of the Company, as defined, Mr. Wycoff will be
entitled to a cash severance amount equal to 2.99 times the amount of Mr.
Wycoff's annual compensation.
A change in control is generally defined in the employment agreement to
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of the SEC proxy rules, provided that a change of control
shall be deemed to have occurred if (i) the acquisition by any person of 25% or
more of the Company's outstanding voting securities, or (ii) during any two-year
period a change in a majority of the directors of the Company has occurred
without the approval of at least two-thirds of the persons who were directors of
the Company at the beginning of such period.
DIRECTORS' FEES
The Board of the Bank meets monthly and the Board of the Company meets
quarterly. Cash compensation is paid to Directors for attendance at regularly
scheduled and special Board meetings. Each non-officer director receives a fee
of $500 for attendance at each regular or special Board meeting and each
non-officer director who attends a committee meeting also receives $250 per
meeting attended.
DIRECTORS' STOCK OPTION PLAN
The Company maintains the Amended and Restated 1993 Directors' Stock Option
Plan (the "Directors' Plan") which provides for the grant of compensatory stock
options to non-employee directors of the Company and the Bank. Pursuant to the
Directors' Plan, in June 1993 each director of the Company or the Bank who was
not an employee of the Company or any subsidiary was granted a compensatory
stock option to purchase 5,000 shares of Common Stock, at an exercise price of
$3.50 per share. In addition, options to purchase 250 shares were granted to
each non-employee director on December 31, 1993, 1994, 1995 and 1996 and will
also be granted options to purchase 525 shares on December 31, 1997 until
December 31, 2007. The exercise price is equal to the fair market value of a
share of Common Stock on the date of grant. Options granted pursuant to the
Directors' Plan are vested and exercisable six months from the date of grant.
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return on the
Common Stock of Progress Financial Corporation over the five year period ending
December 31, 1997 with (i) the yearly cumulative total return on all stocks
included on the NASDAQ Stock Market and (ii) the yearly cumulative total return
on the stocks included in the NASDAQ Bank Stocks Index. All of the cumulative
returns are computed assuming the reinvestment of dividends at the frequency
with which dividends were paid during the applicable years.
[GRAPHIC OMITTED]
The index level for all series was set to 100 on 12/31/93.
<PAGE>
INDEBTEDNESS OF MANAGEMENT
The Bank offers certain loans to its directors, officers and employees. It
is the belief of management that these loans do not involve more than the normal
risk of collectibility. Except for the waiving in most cases of loan origination
fees for officers and employees during their employment or association with the
Bank, these loans are made on substantially the same terms as those prevailing
at the time for comparable transactions with nonaffiliated persons. Executive
officers, directors, officers and employees of the Bank receive no discount from
the market interest rate for loans made by the Bank. However, the Bank in most
cases continues to discount loan origination fees for loans to officers and
employees. As of December 31, 1997, eight loans totaling $587,565 (or 2.33% of
the Company's total stockholders' equity) were outstanding to the Company's
directors and executive officers as a group.
As of December 31, 1997, the following directors and senior officers of the
Company had loans from the Bank which exceeded an aggregate of $60,000
outstanding during 1997.
<TABLE>
<CAPTION>
Highest Principal Principal Balance as of
Name Interest Rate Type of Loan Balance During 1997 December 31, 1997
---- ------------- ------------ ------------------- -----------------------
<S> <C> <C> <C> <C>
Eric J. Morgan 6.875% Residential Mortgage $273,364 $269,784
(Senior Vice President)
William L. Mueller 6.75% Residential Mortgage $193,185 $190,394
(Director)
Paul M. LaNoce (Director) 8.09% Installment Loan $ 37,537 $ 34,612
8.75% Commercial Loan 48,000 45,665
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Pursuant to Item 405 of Regulation S-K, the Company is required to disclose
(based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company pursuant to Rule 16a-3(e) during its most recent fiscal year and
Forms 5 and amendments thereto furnished to the Company with respect to its most
recent year) each person who, at any time during the fiscal year, was a
director, executive officer or beneficial owner of more than ten percent of the
Company's common stock that failed to file on a timely basis, as disclosed in
the above Forms, reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year or prior fiscal years.
Based upon its review of Forms 3, 4 and 5 and amendments thereto furnished
to the Company during and with respect to 1997, the Company is not aware of any
director, officer, beneficial owner of more than 10 percent of the Company's
common stock or any other person subject to Section 16 of the Securities
Exchange Act of 1934 who has failed to file any such form on a timely basis
during 1997.
<PAGE>
PROPOSAL TO ADOPT AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES COMMON STOCK
At the Annual Meeting, stockholders will be asked to consider and approve a
proposal to amend the Company's Certificate of Incorporation to increase the
number of shares of authorized Common Stock from 6,000,000 to 12,000,000. Such
amendment was unanimously approved by the Board of Directors of the Company.
DESCRIPTION OF THE AMENDMENT
The Company's Certificate of Incorporation currently authorizes 7,000,000
shares of capital stock, consisting of 6,000,000 shares of Common Stock and
1,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). The proposed amendment to the Certificate of Incorporation would
increase the number of shares of authorized capital stock by 6,000,000 shares,
from 7,000,000 shares to 13,000,000. If the amendment is authorized, the first
sentence of Paragraph (a) of Section 5 of the Company's Certificate of
Incorporation would be amended to read as follows:
(a) The total number of shares of all classes of capital stock which the
Corporation shall have the authority to issue is 12,000,000 shares
of Common Stock, consisting of:
(i) 12,000,000 shares of Common Stock, $1.00 par value per
share; and
(ii) 1,000,000 shares of Preferred Stock, $.01 par value per share.
PURPOSE OF THE AMENDMENT
As of December 31, 1997, there were 4,063,738 shares of Common Stock
outstanding. At such date, the Company also had reserved an aggregate of 100,753
shares of Common Stock for issuance pursuant to the exercise of stock options or
stock grants under the Company's 1984 Key Employee Stock Compensation Plan,
353,312 shares under the Company's 1993 Stock Incentive Plan, and 94,500 shares
under the Company's 1993 Director's Stock Option Plan. In addition, 100,000
shares were reserved for issuance under the Company's 1996 Employee Stock
Purchase Plan and if the proposal to amend the Stock Incentive Plan is approved
an additional 100,000 shares would be reserved for issuance under such Plan.
Since October 1997, the Company has issued an aggregate of 93,656 shares
of Common Stock in connection with several business acquisitions. Thus, the
Company currently has only 1,197,405 shares of Common Stock available for future
issuance. The Company is also considering a public offering of Common Stock,
however, there are currently sufficient shares of Common Stock available for
such an offering and the offering would not be dependent upon approval of the
proposed Amendment. The Board of Directors of the Company has determined that
the number of shares of authorized Common Stock should be increased to provide
the Company with the flexibility to conduct the Company's future operations,
including the issuance, distribution, exchange or reservation of shares of
Common Stock for stock dividends, acquisitions, financings and employee stock
compensation plans. The Board of Directors currently has no specific plans to
issue additional Common Stock, except pursuant to the Company's employee stock
compensation plans and the proposed public offering.
<PAGE>
The newly authorized shares of Common Stock, and the Preferred Stock, may be
issued from time to time in the future for any proper purpose without further
action of the stockholders, except as required by the Certificate of
Incorporation, applicable law or applicable requirements of the NASDAQ Stock
Market. Each share of Common Stock to be authorized for issuance will have the
same rights and will be identical in all respects with each other share of
Common Stock. The newly authorized shares of Common Stock will not affect the
rights, such as voting and liquidation rights, of the shares of Common Stock
currently outstanding. Under certain circumstances, authorized but unissued
shares of Common Stock and Preferred Stock can provide the Board of Directors of
the Company with a means of discouraging an unsolicited change in control of the
Company. Although the proposed amendment may allow the Board of Directors to
issue additional shares of Common Stock in the event of an unsolicited attempt
to acquire control of the Company as a means of discouraging a hostile acquiror,
the Board of Directors has no present intention of using the existing or
proposed authorized but unissued Common Stock or the existing authorized but
unissued Preferred Stock for such purpose. The Board of Directors is not
presently aware of any plans to acquire control of the Company.
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership.
Stockholders who desire to maintain their interests may be able to do so through
normal market purchases, however.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF ADOPTION OF THE PROPOSAL TO
AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK.
<PAGE>
PROPOSAL TO AMEND THE 1993 STOCK INCENTIVE PLAN TO INCREASE THE AUTHORIZED
SHARES TO BE ISSUED UNDER THE PLAN
At the Annual Meeting, stockholders will be asked to consider and approve a
proposal to amend the 1993 Stock Incentive Plan to increase the authorized
shares to be issued under the Plan. Such amendment was unanimously approved by
the Board of Directors of the Company.
DESCRIPTION OF THE AMENDMENT
The Company maintains the 1993 Stock Incentive Plan, which provides for the
grant of stock options and stock appreciation rights to officers and employees
of the Company. The number of shares of Common Stock currently reserved for
issuance under the Stock Incentive Plan was 353,312, of which 12,287 shares
remain available for issuance to date in order to fund additional grants under
the Stock Incentive Plan. As a result, the Board of Directors recently amended
the Stock Incentive Plan to increase the total number of shares of Common Stock
reserved for issuance upon exercise of awards granted under the Stock Incentive
Plan by 100,000, from 353,312 to 453,312.
The Stock Incentive Plan is designed to attract and retain qualified
personnel in key positions, provide officers and key employees with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company and to reward key employees for outstanding performance and the
attainment of targeted goals. The Stock Incentive Plan provides for the grant of
incentive stock options intended to comply with the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") ("incentive stock
options"), non-qualified or compensatory stock options and stock appreciation
rights (collectively "Awards"). Awards are available for grant to officers and
key employees of the Company and any subsidiaries.
DESCRIPTION OF THE AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN
The following description of the Stock Incentive Plan is a summary of its
terms and is qualified in its entirety by reference to the Stock Incentive Plan.
ADMINISTRATION. The Stock Incentive Plan is administered and interpreted by
a committee of the Board of Directors ("Committee") that is composed solely of
two or more non-employee directors.
NUMBER OF SHARES COVERED BY THE STOCK INCENTIVE PLAN. A total of 453,312
shares of Common Stock has been reserved for issuance pursuant to the Stock
Incentive Plan. In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the Stock Incentive Plan,
the number of shares to which any Award relates and the exercise price per share
under any option or stock appreciation right shall be adjusted to reflect such
increase or decrease in the total number of shares of Common Stock outstanding.
STOCK OPTIONS. Under the Stock Incentive Plan, the Board of Directors or
the Committee determines which officers and key employees will be granted
options, whether such options will be incentive or compensatory options, the
number of shares subject to each option, whether such options may be exercised
by delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive stock option shall be
not less than the fair market value of a share of Common Stock on the date the
option is granted, and the per share exercise price of a compensatory stock
option shall at least equal the greater of par value or 85% of the fair market
value of a share of Common Stock on the date the option is granted.
Stock options shall become vested and exercisable in the manner specified
by the Board or the Committee, provided that all outstanding stock options (as
well as stock appreciation rights) will become immediately vested and
exercisable if there is a "change in control" or a "threatened change in
control" of the Company, as defined in the Stock Incentive Plan.
<PAGE>
Each stock option or portion thereof shall be exercisable at any time on or
after it vests and is exercisable until the earlier of ten years after its date
of grant or three months after the date on which the optionee's employment
terminates, unless extended by the Board or the Committee to a period not to
exceed five years from such termination. However, failure to exercise incentive
stock options within three months after the date on which the optionee's
employment terminates may result in adverse tax consequences to the optionee. If
an optionee dies while serving as an employee or terminates his service as a
result of disability or retirement without having fully exercised his options,
the optionee's executors, administrators, legatees or distributees of his estate
shall have the right to exercise such options during the twelve-month period
following the earlier of his death or termination due to disability or
retirement, provided no option will be exercisable more than ten years from the
date it was granted. Stock options are non-transferable except by will or the
laws of descent and distribution. Notwithstanding the foregoing, an optionee who
holds non-qualified options may transfer such options to his or her spouse,
lineal ascendants, lineal descendants, or to a duly established trust for the
benefit or one or more of these lineal descendants, or to a duly established
trust for the benefit or one or more of these individuals. Options so
transferred may thereafter be transferred only to the optionee who originally
received the grant or to an individual or trust to whom the optionee could have
initially transferred the option. Options which are so transferred shall be
exercisable by the transferee according to the same terms and conditions as
applied to the optionee.
STOCK APPRECIATION RIGHTS. Under the Stock Incentive Plan, the Board of
Directors or the Committee is authorized to grant stock appreciation rights to
optionees under which an optionee may surrender any exercisable incentive stock
option or compensatory stock option or any portion thereof in return for payment
by the Company to the optionee of cash or Common Stock in an amount equal to the
excess of the fair market value of the shares of Common Stock subject to option,
or portion thereof, at the time over the exercise price of the option with
respect to such shares, or a combination of cash and Common Stock. Stock
appreciation rights which relate to incentive stock options must be granted
concurrently with the incentive stock options, while stock appreciation rights
which relate to compensatory stock options may be granted concurrently with the
option or at any time thereafter which is prior to the exercise or expiration of
such options.
AMENDMENT AND TERMINATION OF THE STOCK INCENTIVE PLAN. The Stock Incentive
Plan initially became effective in 1993 upon adoption by the Board and the
stockholders of the Company. The amendments to the Stock Incentive Plan
increasing the total number of shares of Common Stock which may be issued under
the Stock Incentive Plan from 353,312 to 453,312 was adopted by the Board in
March 1998. The Stock Incentive Plan shall remain in effect for a period of ten
years from the effective date of the amended Stock Incentive Plan. The Board may
at any time terminate or amend the Stock Incentive Plan with respect to any
shares of Common Stock as to which Awards have not been granted. Termination of
the Stock Incentive Plan shall not affect any previously granted Awards.
FEDERAL INCOME TAX CONSEQUENCES. Under current provisions of the Code, the
federal income tax treatment of incentive stock options and compensatory stock
options is substantially different. As regards to incentive stock options, an
optionee who does not dispose of the shares within two years after the option
was granted, or within one year after the option was exercised, will not
recognize income at the time the option is exercised, and no federal income tax
deduction will be available to the Company at any time as a result of such grant
or exercise. However, the excess of the fair market value of the stock subject
to an incentive stock option on the date such option is exercised over the
exercise price of the option will be treated as an item of tax preference in the
year of exercise for purposes of the alternative minimum tax. If stock acquired
pursuant to an incentive stock option is disposed of before the holding periods
described above expire, then the excess of the fair market value (but not in
excess of the sales proceeds) of such stock on the option exercise date over the
option exercise price will be treated as compensation income to the optionee in
the year in which such disposition occurs and, if it complies with applicable
withholding requirements, the Company will be entitled to a commensurate income
tax deduction. If the holding periods are satisfied, any difference between the
sales proceeds and the fair market value of the stock on the option exercise
date will be treated as long-term capital gain or loss.
<PAGE>
With respect to compensatory stock options, the difference between the fair
market value of the Common Stock on the date of exercise and the option exercise
price generally will be treated as compensation income upon exercise, and the
Company will be entitled to a deduction in the amount of income so recognized by
the optionee. Upon a subsequent disposition of the shares, the difference
between the amount received by the optionee and the fair market value on the
option exercise date will be treated as long or short-term capital gain or loss,
depending on whether the shares were held for more than one year.
No federal income tax consequences are incurred by the Company or the
holder at the time a stock appreciation right is granted. However, upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a deduction
for federal income tax purposes at the same time and in the same amount.
The above description of tax consequences is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the consequences under applicable state and
local income tax laws may not be the same as under the federal income tax laws.
ACCOUNTING TREATMENT. Stock appreciation rights will, in most cases,
require a charge against the earnings of the Company each year representing
appreciation in the value of such rights over periods in which they become
exercisable. Such charge is based on the difference between the exercise price
specified in the related option and the current market price of the Common
Stock. In the event of a decline in the market price of the Common Stock
subsequent to a charge against earnings related to the estimated costs of stock
appreciation rights, a reversal of prior charges is made in the amount of such
decline (but not to exceed aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option or a
non-qualified stock option under the Stock Incentive Plan currently requires any
charge against earnings under generally accepted accounting principles. In
October 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS No. 123"), "Accounting for Stock-Based
Compensation," which is effective for transactions entered into after December
15, 1995. This Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement defines a
fair value method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company uses the
intrinsic value method, whereby pro forma disclosure is included in the
footnotes to the Company's financial statements to show what net income and
earnings per share would have been if the fair value method had been utilized.
If the Company elects to utilize the fair value method, its net income and
earnings per share may be adversely affected.
STOCKHOLDER APPROVAL. No Awards will be granted under the Stock Incentive
Plan for issuance in excess of the 453,312 shares of Common Stock currently
authorized under the Stock Incentive Plan unless the amendment is approved by
stockholders. Stockholder ratification of the amendment will also satisfy
certain Nasdaq market listing and tax requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE
AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN.
<PAGE>
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have presented at the next
annual meeting and included in the management proxy materials relating to such
meeting must be received at the main office of the Company no later than
December 18, 1998. If such proposal is in compliance with all of the
requirements of Rule 14a-8 promulgated under the Securities Exchange Act of
1934, it will be included in the proxy statement and set forth on the form of
proxy issued for the next annual meeting of stockholders. It is urged that any
such proposals be sent by certified mail, return receipt requested.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described herein. However, if any other matters should
properly come before the Annual Meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1997 accompanies this Proxy Statement. Copies of the Company's Form
10-K and/or additional copies of the Company's Annual Report to Stockholders may
be obtained by written request. Such written request should be directed to
Patricia Ellick, Director of Investor Relations, Progress Financial Corporation,
4 Sentry Parkway, Suite 230, P.O. Box 3036, Blue Bell, PA 19422-0764.
