<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __________)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only
[X] Definitive Proxy Statement (as permitted by Rule
14a-6(e)(2))
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PennFirst Bancorp, Inc.
------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PennFirst Bancorp, Inc.
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): (previously paid by wire
transfer)
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2), or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
--------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------
Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------
(2) Form, schedule or registration statement no.:
-----------------
(3) Filing party:
-------------------------------------------------
(4) Date filed:
---------------------------------------------------
<PAGE> 2
[PENNFIRST BANCORP, INC. LETTERHEAD]
March 14, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of PennFirst Bancorp, Inc. (the "Company"). The meeting will be held at the
Connoquenessing Country Club located at RD #2, Route 65, Ellwood City,
Pennsylvania, on Tuesday, April 15, 1997, at 10:00 a.m., Eastern Time. The
matters to be considered by stockholders at the Annual Meeting are described in
detail in the accompanying materials.
The Board of Directors of PennFirst Bancorp, Inc. has determined that
the matters to be considered at the Annual Meeting are in the best interests of
the Company and its shareholders. FOR THE REASONS SET FORTH IN THE PROXY
STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH MATTER TO
BE CONSIDERED.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend
the meeting in person. Let me urge you to mark, sign and date your proxy card
today and return it in the envelope provided, even if you plan to attend the
Annual Meeting. This will not prevent you from voting in person, but will
ensure that your vote is counted if you are unable to attend.
Your continued support of and interest in PennFirst Bancorp, Inc. is
appreciated.
Sincerely,
/S/ Charlotte A. Zuschlag
-------------------------
Charlotte A. Zuschlag
President and Chief Executive Officer
<PAGE> 3
PENNFIRST BANCORP, INC.
600 LAWRENCE AVENUE
ELLWOOD CITY, PENNSYLVANIA 16117
(412) 758-5584
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 15, 1997
----------------------------
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of
PennFirst Bancorp, Inc. (the "Company") will be held at the Connoquenessing
Country Club located at RD #2, Route 65, Ellwood City, Pennsylvania, on
Tuesday, April 15, 1997, at 10:00 a.m., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
1. To elect one director for a two-year term and two directors
for a three-year term and until their successors are elected and qualified;
2. To consider and approve the adoption of the Company's 1997
Stock Option Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for the year ending December 31, 1997;
4. If necessary, to adjourn the Annual Meeting to solicit
additional proxies; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof. Except with respect to procedural
matters incident to the conduct of the Annual Meeting, management is not aware
of any other matters which could come before the Annual Meeting.
The Board of Directors has fixed March 4, 1997 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting or at any
such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Frank D. Martz
------------------
Frank D. Martz
Senior Vice President of Operations and
Secretary
March 14, 1997
Ellwood City, Pennsylvania
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 THIS MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED
BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE> 4
PENNFIRST BANCORP, INC.
-----------------------------
PROXY STATEMENT
-----------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 15, 1997
GENERAL
This Proxy Statement is being furnished to the holders of common
stock, $0.01 par value per share ("Common Stock"), of PennFirst Bancorp, Inc.
(the "Company"), the savings and loan holding company of ESB Bank, F.S.B.
(including all predecessors thereto, "ESB Bank"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at its
Annual Meeting of Stockholders ("Annual Meeting") to be held at the
Connoquenessing Country Club located at RD #2, Route 65, Ellwood City,
Pennsylvania, on Tuesday, April 15, 1997, at 10:00 a.m., Eastern Time, and at
any adjournment thereof, for the purposes set forth in the Notice of Annual
Meeting of Stockholders. This Proxy Statement is expected to be mailed to
stockholders on or about March 14, 1997.
VOTING RIGHTS
Only stockholders of record at the close of business on March 4, 1997
("Voting Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At such date, there were 3,901,830 shares of Common Stock issued and
outstanding and the Company had no other class of equity securities
outstanding.
Holders of record of Common Stock at the close of business on March 4,
1997 will be entitled to one vote per share on all matters that may properly
come before the Annual Meeting. Stockholders of the Company are not permitted
to cumulate their votes for the election of directors. The election of
directors requires an affirmative vote of a majority of the votes cast with a
quorum present. The presence, either in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on March 4, 1997 is
necessary to constitute a quorum at the Annual Meeting. Abstentions are
considered in determining the presence of a quorum. The affirmative vote of
the holders of a majority of the total votes cast at the Annual Meeting is
required for approval of the proposal to ratify the appointment of the
independent auditors. Abstentions will not be counted as votes cast, and
accordingly will have no effect on the voting with respect to this proposal.
The affirmative vote of the holders of a majority of the total votes cast at
the Annual Meeting is required for approval of the proposal to approve the
Company's 1997 Stock Option Plan ("Stock Option Plan"). A majority of the
total votes present in person and by proxy will be required to adjourn the
Annual Meeting, if such action is required to be voted on. Abstentions will
not be counted as votes cast with respect to these proposals. Under rules of
the New York Stock Exchange, the proposals for election of directors,
ratification
<PAGE> 5
of independent auditors, approval of the Stock Option Plan and adjournment, if
necessary, 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 for which there will not be "broker
non-votes."
PROXIES
Shares of Common Stock represented by properly executed proxies, if
such proxies are received in time and not revoked, will be voted in accordance
with the instructions indicated on the proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH PROXIES WILL BE VOTED (i) FOR THE NOMINEES FOR DIRECTOR
DESCRIBED HEREIN; (ii) FOR APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN;
(iii) FOR THE RATIFICATION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1997; (iv) FOR
ADJOURNMENT AS TO ANY MATTER, IF REQUIRED; AND (v) IN THE DISCRETION OF THE
PROXY HOLDER AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE ANNUAL
MEETING. ANY HOLDER OF COMMON STOCK WHO RETURNS A SIGNED PROXY BUT FAILS TO
PROVIDE INSTRUCTIONS AS TO THE MANNER IN WHICH SUCH SHARES ARE TO BE VOTED WILL
BE DEEMED TO HAVE VOTED IN FAVOR OF THE MATTERS SET FORTH IN THE PRECEDING
SENTENCE.
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the Annual Meeting by (i) giving written notice of revocation
to the Secretary of the Company, (ii) properly submitting to the Company a
duly-executed proxy bearing a later date, or (iii) attending the Annual Meeting
and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: PennFirst Bancorp, Inc., 600 Lawrence Avenue, Ellwood City,
Pennsylvania 16117, Attention: Secretary.
BENEFICIAL OWNERSHIP
The following table sets forth information as to the Common Stock
beneficially owned, as of March 4, 1997, by all directors and executive
officers of the Company as a group. As of March 4, 1997, no person other than
the PennFirst Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") was known by
the Company to be the beneficial owner of more than 5% of the Company's issued
and outstanding Common Stock.
2
<PAGE> 6
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial of
Name and Address of Beneficial Owner Ownership(1) Class
------------------------------------ ----------------- -------
<S> <C> <C>
PennFirst Bancorp, Inc.
Employee Stock Ownership Plan Trust
600 Lawrence Avenue
Ellwood City, Pennsylvania 16117 299,048(2) 7.66%
Directors and officers of the Company
as a group (12 persons) 634,491(3) 15.47%
</TABLE>
- ---------------------------------
(1) Pursuant to rules promulgated by the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), a person or entity is considered to
beneficially own shares of Common Stock if the person or entity has or
shares (i) voting power, which includes the power to vote or to direct
voting of the shares, or (ii) investment power, which includes
the power to dispose or direct the disposition of the shares. Unless
otherwise indicated, a person has sole voting power and sole
investment power with respect to the indicated shares. Shares which
are subject to stock options and which may be exercised within 60 days
of March 4, 1997 are deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by such
person.
(2) The PennFirst Bancorp, Inc. Employee Stock Ownership Plan Trust
("Trust") was established pursuant to the PennFirst Bancorp, Inc. ESOP
by an agreement between the Company and William B. Salsgiver, George
William Blank, Jr., Herbert S. Skuba and Edmund C. Smith who act as
trustees of the ESOP ("Trustees"). As of March 4, 1997, 145,182
shares held in the Trust were unallocated, and 153,866 shares held in
the Trust had been allocated to the accounts of participating
employees. Under the terms of the ESOP, the Trustees must vote all
allocated shares held in the ESOP in accordance with the instructions
of the participating employees, and allocated shares for which
employees do not give instructions will be voted in the same ratio on
any matter as to those shares for which instructions are given.
Unallocated shares held in the ESOP will be voted by the ESOP Trustees
in accordance with their fiduciary duties as trustees.
(3) Includes 199,684 shares which may be acquired by all directors and
officers of the Company as a group upon the exercise of stock options.
Also includes 31,436 shares which are held by the ESOP, which have
been allocated to the accounts of participating officers and,
consequently, will be voted at the Annual Meeting by such
participating officers. Does not include 50 shares held by a rabbi
trust established by the Company to fund certain benefits to be paid
to the President and Chief Executive Officer of the Company. See
"Executive Compensation - Excess Benefit Plan."
3
<PAGE> 7
ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation ("Articles of
Incorporation") and Bylaws of the Company provide that the Board of Directors
shall be divided into three classes as nearly equal in number as possible, and
that the members of each class shall be elected for terms of three years and
until their successors are elected and qualified, with one of the three classes
of directors to be elected each year. The number of directors currently
authorized by the Company's Bylaws is seven.
At the Annual Meeting, stockholders of the Company will be asked to
elect one director of the Company for a two-year term and two directors of the
Company for a three-year term and until their successors are elected and
qualified. The three nominees for election as directors were selected by the
Nominating Committee of the Board of Directors and each nominee currently
serves as a director of the Company. There are no arrangements or
understandings between the persons named and any other person pursuant to which
such person was selected as a nominee for election as a director at the Annual
Meeting, and no director or nominee for director is related to any other
director or executive officer of the Company by blood, marriage or adoption.
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 nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors of the Company. At this time, the Board of Directors knows of no
reason why any of the nominees may not be able to serve as a director if
elected.
Article 7.F of the Company's Articles of Incorporation governs
nominations for election to the Board of Directors and requires all nominations
for election to the Board of Directors, other than those made by or at the
direction of the Board, to be made pursuant to timely notice in writing to the
Secretary of the Company, as set forth in the Articles of Incorporation. To be
timely, with respect to an election to be held at an annual meeting of
stockholders, a stockholders' notice must be delivered to, or mailed and
received at, the principal executive offices of the Company, not later than 60
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders. Each written notice of a stockholder nomination must set
forth certain information specified in the Articles of Incorporation. The
presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the procedures set forth in the Articles
of Incorporation.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following tables present information concerning each nominee for
director and each director whose term continues and reflects his tenure as a
director of the Company, his/her principal occupation during the past five
years as well as the number of shares of the Common Stock beneficially owned by
each such person as of March 4, 1997.
4
<PAGE> 8
NOMINEE FOR DIRECTOR FOR TWO-YEAR TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
Common Stock
Position with Beneficially
the Company and Owned as of
Principal Occupation March 4, 1997(2)
During the Director ------------------------
Name Age Past Five Years Since No. %
---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
William B. Salsgiver 63 Chairman of the Board of the 1987(1) 130,907(3) 3.33%
Company and ESB Bank; a
principal of the property
development and residential
construction firm, Perry
Homes, Zelienople,
Pennsylvania.
</TABLE>
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
Common Stock
Position with Beneficially
the Company and Owned as of
Principal Occupation March 4, 1997(2)
During the Director ------------------------
Name Age Past Five Years Since No. %
---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Charles Delman 71 Director; retired; Chairman, 1994 27,476(4) *
President and Chief Executive
Officer of ESB Bancorp, Inc.
from June 1989 to March 1994
and President of Economy from
1971 to December 1992.
Chairman of Economy from
January 1993 to March 1994.
Edmund C. Smith 76 Director; retired; former 1994 20,322(5) *
Works Manager, Armco Steel,
Ambridge, Pennsylvania.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES
BE ELECTED AS DIRECTORS.
DIRECTORS WITH TERMS EXPIRING IN 1998
<TABLE>
<CAPTION>
Common Stock
Position with Beneficially
the Company and Owned as of
Principal Occupation March 4, 1997(2)
During the Director ------------------------
Name Age Past Five Years Since No. %
---- --- ----------------------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
George William Blank, Jr. 73 Director; President of George 1974(1) 59,528(6) 1.52%
W. Blank Supply Co., Inc.,
Ellwood City, Pennsylvania, a
concrete products manufacturer
and building supply
distributor.
Lloyd L. Kildoo 57 Director; Owner and Funeral 1986(1) 103,756(7) 2.64%
Director of Glenn-Kildoo
Funeral Homes of Zelienople
and Cranberry Township,
Pennsylvania.
</TABLE>
5
<PAGE> 9
DIRECTORS WITH TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
Common Stock
Position with Beneficially
the Company and Owned as of
Principal Occupation March 4, 1997(2)
During the Director ------------------------
Name Age Past Five Years Since No. %
---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Herbert S. Skuba 58 Vice Chairman of the Board of 1988(1) 57,386(8) 1.46%
the Company and ESB Bank;
Director, President and Chief
Executive Officer of Ellwood
City Hospital, Ellwood City,
Pennsylvania.
Charlotte A. Zuschlag 45 Director; President and Chief 1988(1) 117,779(9) 2.98%
Executive Officer of the
Company since February 1991
and of ESB Bank since June
1989; Executive Vice President
and Chief Executive Officer of
ESB Bank from November 1988
through May 1989; Vice
President of Operations of ESB
Bank from May 1988 through
November 1988.
</TABLE>
- ---------------------------------
* Amounts to less than 1.0% of the issued and outstanding Common Stock.
(1) Includes service with ESB Bank and all predecessors thereto.
(2) Based on information furnished by the respective individuals. For the
purposes of the preceding tables, pursuant to rules promulgated by the
SEC under the Exchange Act, a person or entity is considered to
beneficially own shares of Common Stock if the person or entity has or
shares (i) voting power, which includes the power to vote or to direct
the voting of the shares, or (ii) investment power, which includes the
power to dispose or direct the disposition of the shares. Unless
otherwise indicated, a director has sole voting power and sole
investment power with respect to the indicated shares. Shares which
are subject to stock options and which may be exercised within 60 days
of March 4, 1997 are deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by such
person.
(3) Includes 95,359 shares owned jointly with Mr. Salsgiver's wife, with
whom voting and dispositive power is shared, 5,194 shares held in Mr.
Salsgiver's IRA and 30,354 shares which may be acquired by Mr.
Salsgiver upon the exercise of stock options.
(4) Includes 11,918 shares owned jointly with Mr. Delman's wife, with whom
voting and dispositive power is shared, 710 shares held in Mr.
Delman's IRA, 10,400 shares which may be acquired by Mr. Delman upon
the exercise of stock options and 4,448 shares held by the Company's
ESOP for the account of Mr. Delman.
(Footnotes continued on following page)
6
<PAGE> 10
- ---------------------------------
(5) Includes 13,922 shares owned by Mr. Smith and 6,400 shares which may
be acquired by Mr. Smith upon the exercise of stock options.
(6) Includes 2,000 shares owned jointly with Mr. Blank's wife, with whom
voting and dispositive power is shared, 16,591 shares held in Mr.
Blank's IRA, 4,136 shares held in Mr. Blank's Keogh Account and 15,900
shares which may be acquired by Mr. Blank upon the exercise of stock
options.
(7) Includes 6,000 shares held by Mr. Kildoo's wife, 65,989 shares owned
jointly with Mr. Kildoo's wife, with whom voting and dispositive power
is shared, 1,310 shares owned jointly by Mr. Kildoo's wife and
mother-in-law, and 3,457 shares owned jointly with Mr. Kildoo's sons,
all of which Mr. Kildoo may be deemed to beneficially own, and 27,000
shares which may be acquired by Mr. Kildoo upon the exercise of stock
options.
(8) Includes 9,850 shares held by Mr. Skuba's wife, 19,559 shares owned
jointly with Mr. Skuba's wife, with whom voting and dispositive power
is shared, 1,566 shares held in trust for Mr. Skuba's son for which
Mr. Skuba is custodian, 481 shares held in Mr. Skuba's IRA and 15,930
shares which may be acquired by Mr. Skuba upon the exercise of stock
options. Does not include 18,603 shares owned by the Ellwood City
Hospital, of which Mr. Skuba serves as President and Chief Executive
Officer and as to which beneficial ownership is disclaimed.
(9) Includes 796 shares held in trust for Ms. Zuschlag's five nieces and
nephews, for which she is custodian, 157 shares held in trust for Ms.
Zuschlag's two godsons, for which she is custodian, 3,184 shares held
in Ms. Zuschlag's IRA, 56,468 shares which may be acquired by Ms.
Zuschlag upon the exercise of stock options and 6,142 shares held by
the Company's ESOP for the account of Ms. Zuschlag. Does not include
50 shares held by a rabbi trust established by the Company to fund
certain benefits to be paid to Ms. Zuschlag pursuant to an Excess
Benefit Plan. Ms. Zuschlag does not possess voting or investment
power with respect to such shares. See "Executive Compensation -
Excess Benefit Plan."
7
<PAGE> 11
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth certain information with respect to the
executive officers of the Company who are not also directors of the Company.
All executive officers of the Company are elected annually by the Board of
Directors and shall serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
Position with the Company
and Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
<S> <C> <C>
Frank D. Martz 41 Senior Vice President of Operations of the Company since
April 1993 and Secretary of the Company since February
1991; Senior Vice President of Operations of ESB Bank
since April 1993 and Secretary of ESB Bank since November
1989; Vice President of Operations of the Company from
February 1991 through April 1993 and of ESB Bank from
November 1988 through April 1993.
Charles P. Evanoski 38 Senior Vice President and Chief Financial Officer of the
Company and ESB Bank since April 1993; Vice President of
the Company from November 1991 through April 1993 and
Treasurer/Controller of the Company from February 1991
through April 1993; Vice President of ESB Bank from
November 1991 through April 1993 and Treasurer/Controller
of ESB Bank from November 1988 through April 1993.
Todd F. Palkovich 42 Senior Vice President of Lending of the Company and ESB
Bank since April 1993; Vice President of Lending of the
Company and ESB Bank from March 1991 through April 1993;
Commercial Loan Officer with Union National Bank of
Pittsburgh from 1987 to March 1991.
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
Position with the Company
and Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
<S> <C> <C>
John T. Stunda 39 Senior Vice President of Administration of the Company
and ESB Bank since January 1996; Vice President of Human
Resources of the Company and ESB Bank from October 1994
to January 1996; Human Resource Manager with Lender's
Service, Coraopolis, Pennsylvania, from January 1994 to
October 1994; Assistant Vice President and Human Resource
Manager with PNC Bank from November 1987 to January 1994.
Robert C. Hilliard 47 Senior Vice President of Internal Audit/Compliance of the
Company and ESB Bank since March 1995. President and
Chief Executive Officer of Economy Savings Bank, PaSA
("Economy") from January 1993 to March 1995. Vice
President, Treasurer and Chief Financial Officer of ESB
Bancorp, Inc. from June 1989 to March 1994 and Vice
President, Treasurer and Chief Financial Officer of
Economy from April 1981 to December 1992.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of the Company's Common Stock to
file reports of ownership and changes in ownership with the SEC and the
National Association of Securities Dealers, Inc. Officers, directors and
greater than 10% stockholders are required by regulation to furnish the Company
with copies of all Section 16(a) forms they file. The Company knows of no
person who owns 10% or more of the Company's Common Stock.
Based solely on review of the copies of such forms furnished to the
Company, the Company believes that during 1996, all Section 16(a) filing
requirements applicable to its officers and directors were complied with.
9
<PAGE> 13
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Regular meetings of the Board of Directors of the Company are held on
a monthly basis and special meetings of the Board of Directors of the Company
are held from time-to-time as needed. There were 13 meetings of the Board of
Directors of the Company held during the 12 months ended December 31, 1996. No
director attended fewer than 75% of both the aggregate total number of meetings
of the Board of Directors held during the 12 months ended December 31, 1996 and
the total number of meetings held by all committees of the Board on which the
director served during such year.
The Board of Directors of the Company has established various standing
committees of the Board, including Executive, Compensation and Audit/Compliance
Committees. The entire Board of Directors of the Company acts as a Nominating
Committee.
The Executive Committee of the Company is authorized to exercise the
powers of the Board of Directors between regular meetings of the Board.
Currently, Messrs. Skuba (Chairman), Salsgiver, Delman and Ms. Zuschlag serve
as members of this Committee. During the 12 months ended December 31, 1996,
the Executive Committee met twice.
The Compensation Committee of the Company makes recommendations
regarding officer salaries to the Board of Directors. Currently, Messrs.
Salsgiver (Chairman), Kildoo and Smith serve as members of this Committee.
During the 12 months ended December 31, 1996, the Compensation Committee met
twice.
The Audit/Compliance Committee of the Company reviews the Company's
records and affairs to determine its financial condition, reviews the Company's
systems of internal control with management and the independent auditors, and
monitors the Company's adherence in accounting and financial reporting to
generally accepted accounting principles. Currently, Messrs. Blank (Chairman),
Smith and Kildoo serve as members of this Committee. The Audit/Compliance
Committee met five times during the 12 months ended December 31, 1996.
The Company and its subsidiaries have other committees comprised of
officers and directors of the Company and such subsidiaries which meet for
specific purposes. The Boards of Directors of the Company and its subsidiaries
have authority under their respective Bylaws to establish such other committees
from time-to-time as may be deemed necessary.
DIRECTORS' COMPENSATION
As of December 1, 1996, except as described below, all non-employee
directors of the Company receive $685 per month (except for Mr. Skuba who
receives $891 per month as Vice Chairman of the Company's Board of Directors)
and are not compensated for attendance at committee meetings. Mr. Salsgiver
receives $1,096 per month as Chairman
10
<PAGE> 14
of the Company's Board of Directors. In addition, fees are paid to members of
the Board of Directors of ESB Bank and PennFirst Financial Services, Inc.,
subsidiaries of the Company. Full-time employee directors of the Company do
not receive any fees for Board or committee meetings.
During 1996, total compensation paid to directors of the Company
amounted to $89,357 in the aggregate.
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company or its
subsidiaries for services rendered in all capacities during the last three
fiscal years to the President and Chief Executive Officer of the Company.
There were no other executive officers of the Company or its subsidiaries whose
total compensation during the last fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
==================================================================================================================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------------------------------------- ALL OTHER
OTHER AWARDS PAYOUTS COMPENSATION(3)
NAME AND ANNUAL ----------------------------------
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SECURITIES UNDERLYING LTIP
(1) OPTIONS PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charlotte A. Zuschlag 1996 $200,346 $25,000 $ -- 7,991(2) $--- $ 5,521
President and Chief 1995 $184,861 $20,000 $ -- 5,000(2) $--- $22,179
Executive Officer 1994 $161,846 $74,000 $ -- 3,600(2) $--- $12,316
==================================================================================================================================
</TABLE>
- ---------------------------
(1) Does not include amounts attributable to miscellaneous benefits
received by the named executive officer, including the payment of club
membership dues and the use and maintenance of an automobile owned by
ESB Bank. In the opinion of management of the Company, the costs to
the Company of providing such benefits to the named executive officer
during the year ended December 31, 1996 did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus reported for
such individual.
(Footnotes continued on following page)
11
<PAGE> 15
- -----------------------
(2) Consists of awards granted pursuant to the Company's 1992 Stock
Incentive Plan (as adjusted for any subsequent stock splits).
(3) During the years ended December 31, 1996, 1995 and 1994, consists of
amounts allocated, accrued or paid by the Company on behalf of Ms.
Zuschlag pursuant to the Retirement Savings and Profit Sharing Plan
and Trust ("Profit Sharing Plan") of $5,521, $5,009 and $5,432,
respectively. During the years ended December 31, 1995 and 1994,
consists of amounts allocated, accrued or paid by the Company on
behalf of Ms. Zuschlag pursuant to the ESOP of $17,170 and $6,884,
respectively. ESOP allocations have not yet been made for 1996.
STOCK OPTIONS
The following table sets forth certain information concerning
individual grants of stock options pursuant to the Company's 1992 Stock
Incentive Plan by the named executive officer during the year ended December
31, 1996.
<TABLE>
<CAPTION>
=========================================================================================================================
Potential Realizable
Value at
Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term (3)
- -------------------------------------------------------------------------------------------------------------------------
% of Total
Options
Options Granted to Exercise Expiration
Name Granted Employees(1) Price (2) Date 5% 10%
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charlotte A. Zuschlag 7,991 24.0% $13.00 7/01/2006 $59,932 $149,112
=========================================================================================================================
</TABLE>
- -----------------------------
(1) Percentage of options to purchase 33,301 shares of Common Stock
granted to all employees during 1996.
(2) The exercise price was based on the market price of the Common Stock
on the date of grant.
(3) Assumes compounded rates of return for the remaining life of the
options and future stock prices of $20.50 and $31.66 at compounded
rates of return of 5% and 10%, respectively.
The following table sets forth certain information concerning
exercises of stock options granted pursuant to the Company's Stock Option Plan
and the 1992 Stock Incentive Plan by the named executive officer during the
year ended December 31, 1996.
12
<PAGE> 16
<TABLE>
<CAPTION>
=====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Shares Acquired Unexercised Options at Options at Year
Name on Exercise Value Realized Year End(1) End(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charlotte A. Zuschlag 5,000 $39,550 56,468 $394,078
=====================================================================================================================
</TABLE>
- -----------------------------
(1) As adjusted for subsequent stock splits.
(2) Based on a per share market price of $13.625 at December 31, 1996.
EMPLOYMENT AGREEMENT
On June 13, 1990, ESB Bank entered into a three-year employment
agreement (the obligations of which were assumed by the Company) with Ms.
Zuschlag, the Company's President and Chief Executive Officer ("Employment
Agreement"). Pursuant to the Employment Agreement, the salary level for Ms.
Zuschlag may be adjusted each year as determined by the Board of Directors.
Effective December 1, 1996, such amount was adjusted to $228,500. The
Employment Agreement is automatically renewed for successive one-year terms on
each anniversary date of the commencement of the Employment Agreement unless
either the Board of Directors or Ms. Zuschlag provides contrary written notice
to the other not less than 45 days in advance of such anniversary date. The
Employment Agreement is terminable by the Company for just cause, as defined,
at any time upon written notice or based upon certain events specified by the
rules and regulations of the Office of Thrift Supervision ("OTS"). The
Employment Agreement also contains provisions which provide Ms. Zuschlag with
specified benefits in the event that she is terminated subsequent to a change
in control, as defined, of the Company or Ms. Zuschlag terminates her
employment subsequent to a change in control for good reason, as defined.
The Employment Agreement defines "change in control" to include any of
the following (i) a change in control as defined in 12 C.F.R. Section 574.4(a)
and (b) subject to the provisions of 12 C.F.R. Section 574.4(c); (ii) any
change in control required to be reported pursuant to Item 6(e) of Schedule 14A
promulgated under the Exchange Act; (iii) the acquisition of beneficial
ownership by any person (as defined in Sections 13(d) and 14(d) of the Exchange
Act) of 25% or more of the combined voting power of the Company's then
outstanding securities; or (iv) during any period of two consecutive years, a
change in the majority of the Board of Directors for any reason unless the
election of each new director was approved by at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
13
<PAGE> 17
The Employment Agreement provides for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Company. Severance payments will also be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to an acquisition of control, Ms. Zuschlag is
assigned duties inconsistent with her position, duties, responsibilities and
status immediately prior to such change in control. The severance payments
from the Company will equal 2.99 times Ms. Zuschlag's average annual
compensation for the preceding five years. Such amount will be paid within
five business days following the termination of employment. As of December 31,
1996, Ms. Zuschlag would be entitled to severance payments of approximately
$628,730 in the event of a termination of employment in connection with any
change in control of the Company. Section 280G of the Code, states that
severance payments which equal or exceed three times the base compensation of
the individual are deemed to be "excess parachute payments" if they are
contingent upon a change in control. Individuals receiving excess parachute
payments are subject to a 20% excise tax on the amount of such excess payments,
and the employer is not entitled to deduct the amount of such excess payments.
The Employment Agreement provides that if the severance payments to Ms.
Zuschlag constitute excess parachute payments in the opinion of counsel to the
Company in consultation with the Company's independent accountants, then
payments shall be reduced to the largest amount that can be paid without
constituting excess parachute payments.
COMPENSATION COMMITTEE
Executive compensation is determined by the Compensation Committee of
the Board of Directors. The report of the Compensation Committee with respect
to compensation for the Chief Executive Officer and all other executive
officers is set forth below.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
The executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee"), which is composed of the
individuals listed below this report, none of whom is a full-time employee
director of the Company. The Committee makes recommendations regarding officer
salaries to the Board of Directors.
The Committee determines the level of salary increases, if any, to
take effect on December 1 after reviewing various published surveys of
compensation paid to executives performing similar duties for financial
institutions and their holding companies, with a particular focus on the level
of compensation paid by comparable institutions in ESB Bank's market. Also, it
is the policy of the Committee to determine the salary components of executive
compensation upon the basis of corporate performance, although the performance
factors which the Committee considers are profitability, capital levels, and
performance relative to such industry standards as problem asset levels, loan
production, regulatory compliance, and asset-liability management. The
Committee also considers whether or not the overall value of the Company has
improved from year to year.
14
<PAGE> 18
The Company's executive compensation program has been designed to:
1. Align the interests of executives with the interests of the
stockholders by providing performance based awards in cash and stock;
and
2. Allow the Company to compete for and retain executives
critical to the Company's success by providing an opportunity for
compensation that is comparable to the levels offered by other
companies in our market.
Stock options were granted to Ms. Zuschlag and all executive officers
of the Company during fiscal 1994. Ms. Zuschlag received 3,600 stock options
during fiscal 1994 (adjusted for subsequent six-for-five stock splits). All
executive officers of the Company as a group received 12,600 stock options
during fiscal 1994 (adjusted for subsequent six-for-five stock splits). Stock
options were granted to Ms. Zuschlag and all executive officers of the Company
during fiscal 1995. Ms. Zuschlag received 5,000 stock options during fiscal
1995. All executive officers of the Company as a group received 15,000 stock
options during fiscal 1995. Stock options were granted to Ms. Zuschlag and all
executive officers of the Company during fiscal 1996. Ms. Zuschlag received
7,991 stock options during fiscal 1996. All executive officers of the Company
as a group received 22,951 stock options during fiscal 1996.
During fiscal 1994, bonuses of $50,000 and $24,000 were paid to Ms.
Zuschlag and bonuses of $62,000 and $62,850 were paid to all executive officers
of the Company as a group. During fiscal 1995, a $20,000 bonus was paid to Ms.
Zuschlag and bonuses of $67,450 were paid to all executive officers of the
Company as a group. During fiscal 1996, a $25,000 bonus was paid to Ms.
Zuschlag and bonuses of $78,000 were paid to all executive officers of the
Company as a group.
Ms. Zuschlag's compensation increased from $161,846 for fiscal 1994 to
$184,861 for fiscal 1995 to $200,346 for fiscal 1996. At the meeting of the
Committee that determined Ms. Zuschlag's salary to be effective December 1,
1996, the Committee reviewed and considered various published compensation
surveys, Ms. Zuschlag's increased scope of responsibilities relating to ESB
Bank's continuing growth, the Company's pending acquisition of Troy Hill
Bancorp, Inc., as well as the performance factors stated above. After
reviewing the above mentioned factors, the Committee recommended to the Board
of Directors an increase in compensation to a level of $228,500 effective
December 1, 1996.
The Compensation Committee
William B. Salsgiver (Chairman)
Lloyd L. Kildoo
Edmund C. Smith
15
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return on the
Common Stock over a five-year measurement period with (i) the yearly cumulative
total return on the stocks included in the S&P 500 Total Return Index and (ii)
the yearly cumulative total return on the stocks included in the SNL Securities
All Banks and Thrifts Index. All of these cumulative returns are computed
assuming the reinvestment of dividends at the frequency with which dividends
were paid during the applicable year.
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
---------------------------------------------------------------------------------------------
INDEX 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PENNFIRST BANCORP, INC. 100.00 180.98 181.34 158.11 198.75 214.02
S&P 500 100.00 107.62 118.47 120.03 165.13 202.89
ALL BANKS AND THRIFTS 100.00 137.32 152.38 149.01 231.98 321.56
</TABLE>
16
<PAGE> 20
EXCESS BENEFIT PLAN
On October 30, 1996, the Company adopted an Excess Benefit Plan
("EBP") for the purpose of permitting Ms. Zuschlag, and any other employees of
the Company who may be designated pursuant to the EBP, to receive certain
benefits that Ms. Zuschlag otherwise would be eligible to receive under the
Company's Retirement Plan and ESOP but for the limitations set forth in
Sections 401(a)(17), 402(g) and 415 of the Internal Revenue Code of 1986, as
amended (the "Code"). Pursuant to the EBP, during any plan year the Company
shall make matching contributions on behalf of the participant in an amount
equal to the amount of matching contributions that would have been made by the
Company on behalf of the participant but for limitations in the Code, less the
actual amount of matching contributions actually made by the Company on behalf
of the participant. Finally, the EBP generally provides that during any plan
year a participant shall receive a supplemental ESOP allocation in an amount
equal to the amount which would have been allocated to the participant but for
limitations in the Code, less the amount actually allocated to the participant
pursuant to the ESOP. The supplemental benefits to be received by a
participant pursuant to the EBP shall be credited to an account maintained
pursuant to the EBP within 180 days after the end of each plan year. In
connection with its adoption of the EBP, the Company adopted a "rabbi trust"
which currently holds 50 shares of Common Stock to fund its obligation to Ms.
Zuschlag under the EBP.
INDEBTEDNESS OF MANAGEMENT
In accordance with applicable federal laws and regulations, ESB Bank
offers mortgage loans to its directors, officers and full-time employees for
the financing of their primary residences as well as various consumer loans.
These loans are generally made on substantially the same terms as those
prevailing at the time for comparable transactions with non-affiliated persons.
It is the belief of management that these loans neither involve more than the
normal risk of collectibility nor present other unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any
credit extended by a savings institution to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any
related interest of the foregoing, must (i) be on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings association with non-affiliated parties;
(ii) be pursuant to underwriting standards that are no less stringent than
those applicable to comparable transactions with non-affiliated parties; (iii)
not involve more than the normal risk of repayment or present other unfavorable
features; and (iv) not exceed, in the aggregate, the institution's unimpaired
capital and surplus, as defined.
17
<PAGE> 21
The following table sets forth information as to all directors and
executive officers of the Company, including members of their immediate
families and affiliated entities, who had loans with ESB Bank aggregating
$60,000 or more during the 12 months ended December 31, 1996.
<TABLE>
<CAPTION>
Highest
Year Balance Principal Interest Rate
Name and Position Nature of Loan from 1/1/96 Balance at as of
or Relationship Indebtedness Made to 12/31/96 12/31/96 12/31/96
--------------- ------------ ---- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Perry Homes(1) Commercial real estate 1972 $ 85,211 $ 45,546 8.00%
Commercial real estate 1974 267,445 231,274 9.00
Commercial real estate 1974 38,189 28,703 8.50
Commercial real estate 1976 139,036 122,666 9.25
Edmund C. Smith Mortgage 1986 68,543 58,173 8.63
Ellwood City Hospital(2) Commercial business 1994 1,596,128 1,105,012 5.00
Frank D. Martz Mortgage 1996 60,750 59,356 6.75
John T. Stunda Line of credit 1994 4,045 308 10.25
Mortgage 1996 200,000 198,453 6.88
</TABLE>
(1) Mr. Salsgiver, a director of the Company since 1991 and ESB Bank since
1987, is one of the principals of Perry Homes, a property development
and construction firm.
(2) Mr. Skuba, a director of the Company since 1991 and ESB Bank since
1988, is the President and Chief Executive Officer of the Ellwood City
Hospital.
PROPOSAL TO ADOPT THE 1997 STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the Stock Option Plan which 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 reward key employees
for outstanding performance. The Stock Option Plan is also designed to retain
qualified directors for the Company. The Stock Option Plan provides for the
grant of incentive stock options intended to comply with the requirements of
Section 422 of the Code ("incentive stock options"), non-qualified or
compensatory stock options and stock appreciation rights (collectively
"Awards"). Awards will be available for grant to directors and key employees
of the Company and any subsidiaries, except that directors will not be eligible
to receive incentive stock options. If stockholder approval is obtained,
options to acquire shares of Common Stock will be awarded to key employees of
the Company and the Savings Bank and directors of the Company with an exercise
price equal to the fair market value of the Common Stock on the date of such
approval.
18
<PAGE> 22
DESCRIPTION OF THE STOCK OPTION PLAN
The following description of the Stock Option Plan is a summary of its
terms and is qualified in its entirety by reference to the Stock Option Plan, a
copy of which is attached hereto as Appendix A.
ADMINISTRATION. The Stock Option 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."
STOCK OPTIONS. Under the Stock Option 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 a stock option shall be equal to
the fair market value of a share of Common Stock on the date the option is
granted.
All options granted to participants under the Stock Option Plan shall
become vested and exercisable in the manner specified by the Board of Directors
or the Committee. Notwithstanding the foregoing, no vesting shall occur on or
after a participant's employment with the Company is terminated for any reason
other than his death or disability. Unless the Board or the Committee shall
specifically state otherwise at the time an option is granted, all options
granted to participants shall become vested and exercisable in full on the date
an optionee terminates his employment with or service to the Company or a
subsidiary company because of his death or disability. In addition, all stock
options will become vested and exercisable in full on the date an optionee
terminates his employment or service to the Company or a subsidiary company as
the result of a change in control of the Company, as defined in the Stock
Option Plan.
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 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. Each stock option or portion thereof to non-employee directors shall
be exercisable at any time on or after it vests and becomes exercisable until
the earlier of ten years after its date of grant or the third annual
anniversary of the date on which the optionee ceases to be a non-employee
director. If an optionee dies while serving as an employee or a non-employee
director or terminates his service as an employee or a non-employee director as
a result of disability 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,
19
<PAGE> 23
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
of 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 Option 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. A stock appreciation right may be granted concurrently with the stock
option to which it relates or at any time thereafter which is prior to the
exercise or expiration of such option.
NUMBER OF SHARES COVERED BY THE STOCK OPTION PLAN. A total of 195,000
shares of Common Stock has been reserved for issuance pursuant to the Stock
Option Plan. In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the Stock Option 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 the Common Stock
outstanding.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN. Unless sooner
terminated, the Stock Option Plan shall continue in effect for a period of ten
years from the effective date, which is March 7, 1997, the date the Stock
Option Plan was adopted by the Board and became effective by its terms.
Termination of the Stock Option 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 different. As regards to incentive stock
options, an optionee who meets certain holding period requirements will not
recognize income at the time the option is granted or at the time the option is
exercised, and a federal income tax deduction generally will not be available
to the Company at any time as a result of such grant or exercise. With respect
to compensatory stock options, the difference between the fair market value 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 the
exercise of a stock appreciation right, the holder
20
<PAGE> 24
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 in the same amount.
The above description of tax consequences under federal law 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 Option Plan currently requires any
charge against earnings under generally accepted accounting principles. In
certain circumstances, shares issuable pursuant to outstanding options under
the Stock Option Plan might be considered outstanding for purposes of
calculating earnings per share.
STOCKHOLDER APPROVAL. No Awards will be granted under the Stock
Option Plan unless the Stock Option Plan is approved by stockholders.
Stockholder ratification of the Stock Option Plan will satisfy certain Nasdaq
market listing and tax requirements.
AWARDS TO BE GRANTED. No awards have been granted to date and no
determination has been made at this time regarding the amount or timing of
Awards to be made under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION
OF THE 1997 STOCK OPTION PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed KPMG Peat Marwick
LLP, as independent auditors for the Company for the year ending December 31,
1997, and further directed that the selection of auditors be submitted for
ratification by the stockholders at the Annual Meeting. The Company has been
advised by KPMG Peat Marwick LLP that neither the firm nor any of its
associates has any relationship with the
21
<PAGE> 25
Company or its subsidiaries other than the usual relationship that exists
between independent public accountants and clients. KPMG Peat Marwick LLP will
have representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP, AS INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 1997. A MAJORITY OF THE TOTAL VOTES CAST AT THE
MEETING IS REQUIRED FOR RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
AUDITORS.
ADJOURNMENT OF ANNUAL MEETING
Each proxy solicited hereby requests authority to vote for an
adjournment of the Annual Meeting, if an adjournment is deemed to be necessary.
The Company may seek an adjournment of the Annual Meeting for not more than 30
days in order to enable the Company to solicit additional votes in favor of the
proposal to adopt the Stock Option Plan in the event that such proposal has not
received the requisite vote of stockholders at the Annual Meeting and such
proposal has not received negative votes with respect to a majority of the
votes cast. If the Company desires to adjourn the meeting with respect to the
foregoing proposal, it will request a motion that the meeting be adjourned for
up to 30 days with respect to such proposal (and solely with respect to such
proposal, provided that a quorum is present at the Annual Meeting), and no vote
will be taken on such proposal at the originally scheduled Annual Meeting.
Each proxy solicited hereby, if properly signed and returned to the Company and
not revoked prior to its use, will be voted on any motion for adjournment in
accordance with the instructions contained therein. If no contrary
instructions are given, each proxy received will be voted in favor of any
motion to adjourn the meeting. Unless revoked prior to its use, any proxy
solicited for the Annual Meeting will continue to be valid for any adjournment
of the Annual Meeting, and will be voted in accordance with instructions
contained therein, and if no contrary instructions are given, for the proposal
in question.
Any adjournment will permit the Company to solicit additional proxies
and will permit a greater expression of the stockholders' views with respect to
such proposal. Such an adjournment would be disadvantageous to stockholders
who are against the proposal, because an adjournment will give the Company
additional time to solicit favorable votes and thus increase the chances of
passing such proposal.
If a quorum is not present at the Annual Meeting, no proposal will be
acted upon and the Board of Directors of the Company will adjourn the Annual
Meeting to a later date in order to solicit additional proxies on each of the
proposals being submitted to stockholders.
An adjournment for up to 30 days will not require either the setting
of a new record date or notice of the adjourned meeting as in the case of an
original meeting. The
22
<PAGE> 26
Company has no reason to believe that an adjournment of the Annual Meeting will
be necessary at this time.
BECAUSE THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE PROPOSAL TO ADOPT THE STOCK OPTION PLAN, AS DISCUSSED ABOVE, THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE POSSIBLE ADJOURNMENT OF THE
ANNUAL MEETING. THE HOLDERS OF A MAJORITY OF THE COMPANY'S COMMON STOCK
PRESENT, IN PERSON OR BY PROXY, AT THE ANNUAL MEETING WILL BE REQUIRED TO
APPROVE A MOTION TO ADJOURN THE ANNUAL MEETING.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than those matters described in this Proxy Statement. 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 has retained Morrow & Company, a professional proxy solicitation firm,
to assist in the solicitation of proxies. The fee arrangement with such firm
is $3,000 plus reimbursement for out-of-pocket expenses. 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 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.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next Annual Meeting of
Stockholders of the Company, must be received at the principal executive
offices of the Company, 600 Lawrence Avenue, Ellwood City, Pennsylvania 16117,
Attention: Secretary, no later than Friday, November 14, 1997. If such
proposal is in compliance with all of the requirements of Rule 14a-8
promulgated under the Exchange Act, it will be included in the Company's 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.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article 10.F of the Company's
Articles of Incorporation, which provides that to be properly brought before an
annual meeting, business must be (a) properly brought before the meeting by or
at the direction of the Board of Directors or (b) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought
before
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an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company. A stockholder's notice must set forth, as to each matter the
stockholder proposes to bring before an annual meeting, (a) a brief description
of the business desired to be brought before the annual meeting and (b) certain
other information set forth in the Articles of Incorporation. No stockholder
proposals have been received by the Company in connection with the Annual
Meeting.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Stockholders of the Company as of the Voting Record Date for the
Annual Meeting are being forwarded a copy of the Company's Annual Report to
Stockholders for the twelve months ended December 31, 1996 ("Annual Report").
Included in the Annual Report are the consolidated statements of financial
condition of the Company as of December 31, 1995 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996,
prepared in accordance with generally accepted accounting principles, and the
related report of the Company's independent public accountants. The Annual
Report is not a part of this Proxy Statement.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH
THE SEC UNDER THE EXCHANGE ACT FOR THE YEAR ENDED DECEMBER 31, 1996. UPON
WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY SUCH STOCKHOLDER A COPY OF THE
EXHIBITS TO THE ANNUAL REPORT ON FORM 10-K. SUCH WRITTEN REQUESTS SHOULD BE
DIRECTED TO PENNFIRST BANCORP, INC., 600 LAWRENCE AVENUE, ELLWOOD CITY,
PENNSYLVANIA 16117, ATTENTION: SECRETARY. THE ANNUAL REPORT ON FORM 10-K IS
NOT A PART OF THIS PROXY STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Frank D. Martz
------------------
Frank D. Martz
Senior Vice President of Operations and
Secretary
March 14, 1997
Ellwood City, Pennsylvania
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APPENDIX A
PENNFIRST BANCORP, INC.
1997 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
PennFirst Bancorp, Inc. (the "Corporation") hereby establishes this
1997 Stock Option Plan (the "Plan") upon the terms and conditions hereinafter
stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding those Employees for outstanding performance and the
attainment of targeted goals. All Incentive Stock Options issued under this
Plan are intended to comply with the requirements of Section 422 of the Code,
and the regulations thereunder, and all provisions hereunder shall be read,
interpreted and applied with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.02 "Bank" means ESB Bank, FSB, the wholly-owned subsidiary of the
Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall be deemed to have
occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Corporation and any trustee or other
fiduciary holding securities under any employee benefit plan of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by
<PAGE> 29
a vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Corporation outstanding immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve a plan of complete liquidation
of the Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's assets. If any of
the events enumerated in clauses (i) through (iv) occur, the Board shall
determine the effective date of the Change in Control resulting therefrom for
purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors
appointed by the Board pursuant to Article IV hereof, each of whom shall be a
Non-Employee Director.
3.07 "Common Stock" means shares of the common stock, $0.01 par
value per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if
no such plan applies, which would qualify such Employee for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board approves
this Plan.
3.10 "Employee" means any person who is employed by the Corporation
or a Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value
per share of the Corporation's Common Stock on the date an Award is granted.
For purposes hereof, the Fair Market Value of a share of Common Stock shall be
the closing sale price of a share of Common Stock on the date in question (or,
if such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the
composite of the markets, if more than one) or national quotation system in
which such shares are then traded, or if no such closing prices are reported,
the mean
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between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this
Plan which the Board intends (at the time it is granted) to be an incentive
stock option within the meaning of Section 422 of the Code or any successor
thereto.
3.14 "Non-Employee Director" means a member of the Board who is not
an Officer or Employee of the Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this
Plan which is not an Incentive Stock Option.
3.16 "Officer" means an Employee whose position in the Corporation
or Subsidiary Company is that of a corporate officer, as determined by the
Board.
3.17 "Option" means a right granted under this Plan to purchase
Common Stock.
3.18 "Optionee" means an Employee or Non-Employee Director to whom
an Option is granted under the Plan.
3.19 "OTS" means the Office of Thrift Supervision.
3.20 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
any applicable qualified pension benefit plan maintained by the Corporation or
a Subsidiary Company.
3.21 "Stock Appreciation Right" means a right to surrender an
Option in consideration for a payment by the Corporation in cash and/or Common
Stock, as provided in the discretion of the Committee in accordance with
Section 8.11.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Bank, which meet the definition of "subsidiary
corporations" set forth in Section 425(f) of the Code, at the time of granting
of the Award in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority (subject to
compliance with applicable OTS regulations) to adopt, amend and rescind such
rules, regulations and procedures as, in its opinion, may
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be advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide
for the payment of some or all of such exercise or purchase price by delivery
of previously-owned shares of Common Stock or other property and/or by
withholding some of the shares of Common Stock which are being acquired. The
interpretation and construction by the Committee of any provisions of the Plan,
any rule, regulation or procedure adopted by it pursuant thereto or of any
Award shall be final and binding in the absence of action by the Board of
Directors.
4.02 APPOINTMENT AND OPERATION OF THE COMMITTEE. The members of
the Committee shall be appointed by, and will serve at the pleasure of, the
Board. The Board from time to time may remove members from, or add members to,
the Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee
may adopt such rules, regulations and procedures as it deems appropriate for
the conduct of its affairs. It may appoint one of its members to be chairman
and any person, whether or not a member, to be its secretary or agent. The
Committee shall report its actions and decisions to the Board at appropriate
times but in no event less than one time per calendar year.
4.03 REVOCATION FOR MISCONDUCT. The Board of Directors or the
Committee may by resolution immediately revoke, rescind and terminate any
Option, or portion thereof, to the extent not yet vested, or any Stock
Appreciation Right, to the extent not yet exercised, previously granted or
awarded under this Plan to an Employee who is discharged from the employ of the
Corporation or a Subsidiary Company for cause, which, for purposes hereof,
shall mean termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Options granted to a Non-Employee Director who
is removed for cause pursuant to the Corporation's Articles of Incorporation
shall terminate as of the effective date of such removal.
4.04 LIMITATION ON LIABILITY. Neither the members of the Board of
Directors nor any member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan, any rule, regulation
or procedure adopted pursuant thereto or any Awards granted under it. If any
members of the Board of Directors or a member of the Committee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Corporation shall, subject to the requirements of
applicable laws
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and regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and its Subsidiary Companies and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any Federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a legend
upon any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees of the Corporation and its
Subsidiary Companies as may be designated from time to time by the Board of
Directors or the Committee. Awards may not be granted to individuals who are
not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Non-Qualified Options.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 OPTION SHARES. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 195,000 shares. None of such shares shall be the subject
of more than one Award at any time, but if an Award as to any shares is
surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be
exercisable, the number of shares covered thereby shall again become available
for grant under the Plan as if no Awards had been previously granted with
respect to such shares. Notwithstanding the foregoing, if an Option is
surrendered in connection with the
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exercise of a Stock Appreciation Right, or vice versa, the number of shares
covered thereby shall not be available for grant under the Plan.
6.02 SOURCE OF SHARES. The shares of Common Stock issued under the
Plan may be authorized but unissued shares, treasury shares, shares purchased
by the Corporation on the open market or from private sources for use under the
Plan or, if applicable, shares held in a grantor trust created by the
Corporation.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board of Directors or the Committee shall, in its discretion,
determine from time to time which Employees and Non-Employee Directors will be
granted Awards under the Plan, the number of shares of Common Stock subject to
each Award, and whether each Option will be an Incentive Stock Option or a
Non-Qualified Stock Option. In making determinations with respect to Employees
there shall be taken into account the duties, responsibilities and performance
of each respective Employee, his present and potential contributions to the
growth and success of the Corporation, his salary and such other factors as the
Board of Directors or the Committee shall deem relevant to accomplishing the
purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it
pertains, the exercise price, whether it is a Non-Qualified Option or an
Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Board of Directors or the Committee in each instance shall
deem appropriate, provided they are not inconsistent with the terms, conditions
and provisions of this Plan. Each Optionee shall receive a copy of his
executed Stock Option Agreement.
8.02 AWARDS TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS. Specific
Awards to Employees and Non-Employee Directors shall be made to such persons
and in such amounts as are determined by the Board of Directors or the
Committee.
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8.03 OPTION EXERCISE PRICE.
(a) INCENTIVE STOCK OPTIONS. The per share price at
which the subject Common Stock may be purchased upon exercise of an Incentive
Stock Option shall be no less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock at the time such Incentive Stock Option
is granted, except as provided in Section 8.10(b), and subject to any
applicable adjustment pursuant to Article IX hereof.
(b) NON-QUALIFIED OPTIONS. The per share price at which
the subject Common Stock may be purchased upon exercise of a Non-Qualified
Option shall be no less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock at the time such Non-Qualified Option is
granted, and subject to any applicable adjustment pursuant to Article IX
hereof.
8.04 VESTING AND EXERCISE OF OPTIONS.
(a) GENERAL RULES. Incentive Stock Options and
Non-Qualified Options granted hereunder shall become vested and exercisable at
the rate, to the extent and subject to such limitations as may be specified by
the Board of Directors or the Committee. Notwithstanding the foregoing, no
vesting shall occur on or after an Employee's employment with the Corporation
and all Subsidiary Companies is terminated for any reason other than his death
or Disability. In determining the number of shares of Common Stock with
respect to which Options are vested and/or exercisable, fractional shares will
be rounded up to the nearest whole number if the fraction is 0.5 or higher, and
down if it is less.
(b) ACCELERATED VESTING. Unless the Board of Directors
or the Committee shall specifically state otherwise at the time an Option is
granted, all Options granted hereunder shall become vested and exercisable in
full on the date an Optionee terminates his employment with or service to the
Corporation or a Subsidiary Company because of his death or Disability. In
addition, all options hereunder shall become immediately vested and exercisable
in full on the date an Optionee terminates his employment or service to the
Corporation or a Subsidiary Company as the result of a Change in Control of the
Corporation.
8.05 DURATION OF OPTIONS.
(a) EMPLOYEE GRANTS. Except as provided in Sections
8.05(c) and 8.10, each Option or portion thereof shall be exercisable at any
time on or after it vests and becomes exercisable until the earlier of (i) ten
(10) years after its date of grant or (ii) three (3) months after the date on
which the Optionee ceases to be employed by the Corporation and all Subsidiary
Companies, unless the Board of Directors or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
upon termination of employment from three (3) months to a period not exceeding
five (5) years.
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(b) NON-EMPLOYEE DIRECTOR GRANTS. Except as provided in
Section 8.05(c), each Option or portion thereof shall be exercisable at any
time on or after it vests and becomes exercisable until the earlier of (i) ten
(10) years after its date of grant or (ii) the third annual anniversary of the
date on which the Optionee ceases to be a Non-Employee Director.
(c) EXCEPTION FOR TERMINATION DUE TO DEATH OR DISABILITY.
If an Employee dies while in the employ of the Corporation or a Subsidiary
Company or terminates employment with the Corporation or a Subsidiary Company
as a result of Disability without having fully exercised his Options, the
Optionee or the executors, administrators, legatees or distributee of his
estate shall have the right, during the twelve-month period following the
earlier of his death or Disability, to exercise such Options to the extent
vested on the date of such death or Disability. If a Non-Employee Director
dies while serving as a Non-Employee Director without having fully exercised
his Options, the Non-Employee Director's executors, administrators, legatees or
distributee of his estate shall have the right, during the twelve-month period
following such death, to exercise such Options. In no event, however, shall
any Option be exercisable more than ten (10) years from the date it was
granted.
8.06 NONASSIGNABILITY. Options shall not be transferable by an
Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the
Optionee's guardian or legal representative. Notwithstanding the foregoing, or
any other provision of this Plan, 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 of 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 pursuant to
this Section 8.06. Options which are transferred pursuant to this Section 8.06
shall be exercisable by the transferee according to the same terms and
conditions as applied to the Optionee.
8.07 MANNER OF EXERCISE. Options may be exercised in part or in
whole and at one time or from time to time. The procedures for exercise shall
be set forth in the written Stock Option Agreement provided for in Section 8.01
above.
8.08 PAYMENT FOR SHARES. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall
be made to the Corporation upon exercise of the Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee in cash or, at the discretion of the Board of Directors or the
Committee, by delivering shares of Common Stock (including shares acquired
pursuant to the exercise of an Option) or other property equal in Fair Market
Value to the purchase price of the shares to be acquired pursuant to the
Option, by withholding some of the shares of Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing.
8.09 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any voting
or dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered
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by an Option prior to the time that his name is recorded on the Corporation's
stockholder ledger as the holder of record of such shares acquired pursuant to
an exercise of an Option.
8.10 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.09 above, to those
contained in this Section 8.10.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock
Option is granted, of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar
year under this Plan and stock options that satisfy the requirements of Section
422 of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(b) LIMITATION ON TEN PERCENT STOCKHOLDERS. The price at
which shares of Common Stock may be purchased upon exercise of an Incentive
Stock Option granted to an individual who, at the time such Incentive Stock
Option is granted, owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of stock issued to stockholders
of the Corporation or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common Stock
of the Corporation at the time of grant, and such Incentive Stock Option shall
by its terms not be exercisable after the earlier of the date determined under
Section 8.04 or the expiration of five (5) years from the date such Incentive
Stock Option is granted.
(c) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An
Optionee shall immediately notify the Corporation in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of any
shares of Common Stock acquired through exercise of an Incentive Stock Option,
within two (2) years after the grant of such Incentive Stock Option or within
one (1) year after the acquisition of such shares, setting forth the date and
manner of disposition, the number of shares disposed of and the price at which
such shares were disposed of. The Corporation shall be entitled to withhold
from any compensation or other payments then or thereafter due to the Optionee
such amounts as may be necessary to satisfy any withholding requirements of
Federal or state law or regulation and, further, to collect from the Optionee
any additional amounts which may be required for such purpose. The Committee
may, in its discretion, require shares of Common Stock acquired by an Optionee
upon exercise of an Incentive Stock Option to be held in an escrow arrangement
for the purpose of enabling compliance with the provisions of this Section
8.10(c).
8.11 STOCK APPRECIATION RIGHTS.
(a) GENERAL TERMS AND CONDITIONS. The Board of Directors
or the Committee may, but shall not be obligated to, authorize the Corporation,
on such terms and
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conditions as it deems appropriate in each case, to grant rights to Optionees
to surrender an exercisable Option, or any portion thereof, in consideration
for the payment by the Corporation of an amount equal to the excess of the Fair
Market Value of the shares of Common Stock subject to the Option, or portion
thereof, surrendered over the exercise price of the Option with respect to such
shares (any such authorized surrender and payment being hereinafter referred to
as a "Stock Appreciation Right"). Such payment, at the discretion of the Board
of Directors or the Committee, may be made in shares of Common Stock valued at
the then Fair Market Value thereof, or in cash, or partly in cash and partly in
shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation
Right may include (without limitation), subject to other provisions of this
Section 8.11 and the Plan, the period during which, date by which or event upon
which the Stock Appreciation Right may be exercised (which shall be on the same
terms as the Option to which it relates pursuant to Section 8.04 hereunder);
the method for valuing shares of Common Stock for purposes of this Section
8.11; a ceiling on the amount of consideration which the Corporation may pay in
connection with exercise and cancellation of the Stock Appreciation Right; and
arrangements for income tax withholding. The Board of Directors or the
Committee shall have complete discretion to determine whether, when and to whom
Stock Appreciation Rights may be granted. Notwithstanding the foregoing, the
Corporation may not permit the exercise of a Stock Appreciation Right issued
pursuant to this Plan until the Corporation has been subject to the reporting
requirements of Section 13 of the Exchange Act for a period of at least one
year prior to the exercise of any such Stock Appreciation Right.
(b) TIME LIMITATIONS. If a holder of a Stock
Appreciation Right terminates service with the Corporation, the Stock
Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised. Notwithstanding the
foregoing, any election by an Optionee to exercise the Stock Appreciation
Rights provided in this Plan shall be made during the period beginning on the
third business day following the release for publication of quarterly or annual
financial information required to be prepared and disseminated by the
Corporation pursuant to the requirements of the Exchange Act and ending on the
twelfth business day following such date. The required release of information
shall be deemed to have been satisfied when the specified financial data
appears on or in a wire service, financial news service or newspaper of general
circulation or is otherwise first made publicly available.
(c) EFFECTS OF EXERCISE OF STOCK APPRECIATION RIGHTS OR
OPTIONS. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease
by a number equal to the number of shares for which the Stock Appreciation
Right was exercised. Upon the exercise of an Option, any related Stock
Appreciation Right shall terminate as to any number of shares of Common Stock
subject to the Stock Appreciation Right that exceeds the total number of shares
for which the Option remains unexercised.
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(d) TIME OF GRANT. A Stock Appreciation Right may be
granted concurrently with the Option to which it relates or at any time
thereafter prior to the exercise or expiration of such Option.
(e) NON-TRANSFERABLE. The holder of a Stock Appreciation
Right may not transfer or assign the Stock Appreciation Right otherwise than by
will or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Award relates and the
exercise price per share of Common Stock under any Award shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization,
liquidation, recapitalization or the like of the Corporation, the shares of the
Corporation's Common Stock shall be exchanged for other securities of the
Corporation or of another corporation, each recipient of an Award shall be
entitled, subject to the conditions herein stated, to purchase or acquire such
number of shares of Common Stock or amount of other securities of the
Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such Optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Awards. Notwithstanding any provision to the contrary, the exercise price of
shares subject to outstanding Awards may be proportionately adjusted upon the
payment of a special large and nonrecurring dividend that has the effect of a
return of capital to the stockholders.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to regulations of the OTS and any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not,
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<PAGE> 39
without the consent of the holder of an Award, alter or impair any Award
previously granted or awarded under this Plan as specifically authorized
herein.
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director of the
Corporation or a Subsidiary Company to continue in such capacity.
ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the
Corporation the amount required to be withheld as a condition to delivering the
shares acquired pursuant to an Award. The Corporation also may withhold or
collect amounts with respect to a disqualifying disposition of shares of Common
Stock acquired pursuant to exercise of an Incentive Stock Option, as provided
in Section 8.10(c).
12.02 METHODS OF TAX WITHHOLDING. The Board of Directors or the
Committee is authorized to adopt rules, regulations or procedures which provide
for the satisfaction of an Optionee's tax withholding obligation by the
retention of shares of Common Stock to which the Employee would otherwise be
entitled pursuant to an Award and/or by the Optionee's delivery of
previously-owned shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 EFFECTIVE DATE OF THE PLAN. This Plan shall become effective
on the Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and prior to the termination of the Plan, provided that no
Incentive Stock Option issued pursuant to this Plan shall qualify as such
unless this Plan is approved by the requisite vote of the holders of the
outstanding voting shares of the Corporation at a meeting of stockholders of
the Corporation held within twelve (12) months of the Effective Date.
Notwithstanding the foregoing or anything to the contrary in this Plan, the
implementation of this Plan and any Awards granted pursuant hereto are subject
to the approval of the Corporation's stockholders.
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<PAGE> 40
13.02 TERM OF PLAN. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire
or are forfeited.
ARTICLE XIV
MISCELLANEOUS
14.01 GOVERNING LAW. To the extent not governed by Federal law,
this Plan shall be construed under the laws of the Commonwealth of
Pennsylvania.
14.02 PRONOUNS. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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<PAGE> 41
PENNFIRST BANCORP, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PENNFIRST BANCORP, INC. FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON APRIL 15, 1997 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of the Company,
or any successors thereto, as proxies, with full powers of substitution, to
vote the shares of the undersigned at the Annual Meeting of Stockholders of the
Company to be held at the Connoquenessing Country Club located at RD #2, Route
65, Ellwood City, Pennsylvania, on April 15, 1997, at 10:00 a.m., Eastern Time,
or at any adjournment thereof, with all the powers that the undersigned would
possess if personally present, as indicated on the reverse side hereof.
1. Election of Directors
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary.) listed.
Nominee for two-year term: William B. Salsgiver
Nominees for three-year term: Charles Delman and
Edmund C. Smith
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to adopt the 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for fiscal 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 42
4. PROPOSAL to adjourn the Annual Meeting, if necessary, to solicit
additional proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote with respect
to approval of the minutes of the last meeting of stockholders, the election of
any person as a director if the nominee is unable to serve or for good cause
will not serve, matters incident to the conduct of the meeting, and upon such
other matters as may properly come before the meeting.
The Board of Directors recommends that you vote FOR the nominees
listed on the reverse side hereof and FOR Proposals 2, 3 and, if necessary, 4.
You are encouraged to specify your choices by marking the appropriate boxes on
the reverse side; however, you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. This proxy may not be
voted for any person who is not a nominee of the Board of Directors of the
Company. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF THE COMPANY WILL BE VOTED AS SPECIFIED. IF
NO SPECIFICATION IS MADE, SHARES WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR PROPOSALS 2, 3 AND, IF
NECESSARY, 4, AND OTHERWISE AT THE DISCRETION OF THE PROXIES.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders of the Company called for April 15, 1997, a Proxy
Statement for the Annual Meeting and the 1996 Annual Report to Stockholders.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE.
Date: , 1997
-----------------------------------
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Signature
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Signature
PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR(S) ON THIS PROXY. ONLY ONE
SIGNATURE IS REQUIRED IN CASE OF A JOINT
ACCOUNT. WHEN SIGNING IN A
REPRESENTATIVE CAPACITY, PLEASE GIVE
TITLE.
