<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-5(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12)
Pennfed Financial Services, Inc.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
Notes:
<PAGE>
[LETTERHEAD OF PENNFED FINANCIAL SERVICES, INC. APPEARS HERE]
September 26, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of PennFed Financial
Services, Inc., we cordially invite you to attend the Annual Meeting of
Stockholders of the Company. The Meeting will be held at 10:00 a.m., local
time, on Friday, October 24, 1997, at the Radisson Hotel, located at 690 Route
46 East, Fairfield, New Jersey.
An important aspect of the annual meeting process is the annual stockholder
vote on corporate business items. I urge you to exercise your rights as a
stockholder to vote and participate in this process. Stockholders are being
asked to consider and vote upon (i) the election of two directors of the
Company; (ii) an amendment to the Company's 1994 Stock Option and Incentive Plan
to increase the number of shares of common stock available for awards thereunder
from 595,000 to 835,623; and (iii) the ratification of the appointment of
auditors. In addition, the meeting will include management's report to you on
the Company's 1997 financial and operating performance.
We encourage you to attend the Meeting in person. Whether or not you plan
to attend, however, please read the enclosed Proxy Statement and then complete,
sign and date the enclosed proxy and return it in the accompanying postpaid
return envelope as promptly as possible. This will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the Meeting.
Your Board of Directors and management are committed to the continued
success of PennFed Financial Services, Inc., and the enhancement of your
investment. As President, I want to express my appreciation for your confidence
and support.
Very truly yours,
/s/ Joseph L. LaMonica
Joseph L. LaMonica
President and Chief
Executive Officer
<PAGE>
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 24, 1997
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of PennFed Financial Services, Inc. (the "Company") will be held at
the Radisson Hotel, located at 690 Route 46 East, Fairfield, New Jersey, at
10:00 a.m., local time, on Friday, October 24, 1997.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Company;
2. The amendment of the Company's 1994 Stock Option and Incentive
Plan to increase the number of shares of common stock available
for awards thereunder from 595,000 to 835,623;
3. The ratification of the appointment of Deloitte & Touche LLP as
auditors for the Company for the fiscal year ending June 30,
1998;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on September 5, 1997
are the stockholders entitled to vote at the Meeting and any adjournments or
postponements thereof. A complete list of stockholders entitled to vote at the
Meeting will be available for stockholders at the offices of the Company during
the ten days prior to the Meeting, as well as at the Meeting.
You are requested to complete and sign the enclosed Proxy Card which
is solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The Proxy will not be used if you attend and vote at the
Meeting in person.
By Order of the Board of Directors
/s/ William C. Anderson
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 26, 1997
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
ANNUAL MEETING OF STOCKHOLDERS
October 24, 1997
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of PennFed Financial Services, Inc. (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Meeting") which will be held at the Radisson Hotel, located at 690
Route 46 East, Fairfield, New Jersey, on Friday, October 24, 1997, at 10:00
a.m., local time, and all adjournments or postponements of the Meeting. The
accompanying Notice of Annual Meeting and form of proxy and this Proxy Statement
are first being mailed to stockholders on or about September 26, 1997. Certain
of the information provided herein relates to Penn Federal Savings Bank ("Penn
Federal" or the "Bank"), a wholly-owned subsidiary of the Company.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of two directors of the Company; (ii) an
amendment to the Company's 1994 Stock Option and Incentive Plan (the "Stock
Option Plan") to increase the number of shares of the Company's common stock,
par value $.01 per share (the "Common Stock") available for awards thereunder
from 595,000 to 835,623; and (iii) the ratification of the appointment of
Deloitte & Touche LLP as the Company's auditors for the fiscal year ending
June 30, 1998.
Vote Required and Proxy Information
All shares of Common Stock represented at the Meeting by properly
executed proxies received prior to or at the Meeting and not revoked, will be
voted at the Meeting in accordance with the instructions thereon. If no
instructions are indicated, properly executed proxies will be voted for the
nominees and the adoption of the proposals set forth in this Proxy Statement.
The Company does not know of any matters, other than as described in the Notice
of Annual Meeting of Stockholders, that are to come before the Meeting. If any
other matters are properly presented at the Meeting for action, the persons
named in the enclosed form of proxy and acting pursuant thereto will have the
discretion to vote on such matters in accordance with their best judgment.
Directors shall be elected by a plurality of the votes cast. In all
matters other than the election of directors, the affirmative vote of the
majority of the votes cast shall be the act of the stockholders. Proxies marked
to abstain with respect to a proposal have the same effect as votes against the
proposal. Votes withheld (for the election of directors) and broker non-votes
will have no effect on the vote. One-third of the shares of the Common Stock,
present in person or represented by proxy, shall constitute a quorum for
purposes of the Meeting. Abstentions and broker non-votes are counted for
purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Patrick D.
McTernan, Secretary, PennFed Financial Services, Inc., 622 Eagle Rock Avenue,
West Orange, New Jersey 07052-2989.
<PAGE>
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on September 5, 1997
will be entitled to one vote for each share then held. As of that date, the
Company had 4,822,124 shares of Common Stock issued and outstanding. The
following table sets forth, as of September 5, 1997, information regarding share
ownership of: (i) those persons or entities known by management to beneficially
own more than five percent of the Common Stock; (ii) the Chief Executive Officer
of the Company and the executive officers of the Company and the Bank whose
salary and bonus exceeded $100,000 in fiscal 1997 (the "Named Officers"); and
(iii) all directors and executive officers of the Company and the Bank as a
group. For information regarding the beneficial ownership of Common Stock by
directors of the Company, see "Proposal I. Election of Directors--General."
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ------------------------------------------ ------------ -------
<S> <C> <C>
PennFed Financial Services, Inc. 367,138(1) 7.61%
Employee Stock Ownership Plan
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
John Hancock Mutual Life Insurance Company, 365,500(2) 7.58
John Hancock Subsidiaries, Inc. and John
Hancock Asset Management
P.O. Box 111
Boston, Massachusetts 02117
and
The Berkeley Financial Group and
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Morgan Grenfell Capital Management Incorporated 309,300(3) 6.41
885 Third Avenue, Suite 3200
New York, New York 10022
Named Officers(4)
- -----------------
Joseph L. LaMonica 153,643 3.13
President and Chief
Executive Officer
Patrick D. McTernan 82,003 1.68
Executive Vice President,
General Counsel and Secretary
Lucy T. Tinker 73,648 1.51
Executive Vice President
and Chief Operating Officer
Jeffrey J. Carfora 19,290 .40
Senior Vice President and
Chief Financial Officer
Barbara J. Sanders 18,500 .38
Senior Vice President and
Lending Group Executive of the Bank
Directors and executive officers 657,500 12.75
of the Company and the Bank
as a group (10 persons)(5)
</TABLE>
footnotes follow
2
<PAGE>
(1) The amount reported represents shares held by the PennFed Financial
Services, Inc. Employee Stock Ownership Plan (the "ESOP"), 108,862 of
which have been allocated to accounts of participants. First Bankers
Trust Company, Quincy, Illinois, the trustee of the ESOP, may be deemed
to beneficially own the shares held by the ESOP which have not been
allocated to the accounts of participants. Pursuant to the terms of the
ESOP, participants in the ESOP have the right to direct the voting of
shares allocated to participant accounts.
(2) As reported by John Hancock Mutual Life Insurance Company ("JHMLIC"),
JHMLIC's wholly-owned subsidiary, John Hancock Subsidiaries, Inc.
("JHSI"), JHSI's wholly-owned subsidiary, John Hancock Asset Management
("JHAM"), JHAM's wholly-owned subsidiary, The Berkeley Financial Group
("TBFG"), and TBFG's wholly-owned subsidiary, John Hancock Advisers,
Inc., ("JHA") in a statement as of December 31, 1996 on a Schedule 13G
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). JHMLIC, JHSI, JHAM and TBFG reported indirect beneficial ownership
of these shares. JHA reported sole voting and dispositive powers as to
all of such shares.
(3) As reported by Morgan Grenfell Capital Management Incorporated ("MGCMI")
in a statement as of December 31, 1996 on a Schedule 13G under the
Exchange Act. MGCMI reported sole voting power as to 74,500 shares and
sole dispositive powers as to 309,300 shares.
(4) Includes shares held directly, including restricted shares and shares
allocated to the accounts of the Named Officers under the ESOP, as well
as shares held jointly with family members, in retirement accounts, in a
fiduciary capacity, by certain members of the Named Officers' families,
by trusts of which the Named Officer is a trustee or substantial
beneficiary, with respect to which the Named Officer may be deemed to
have sole voting and/or investment powers. Also includes 80,325, 46,410,
41,055, 8,925 and 8,925 shares which Mr. LaMonica, Mr. McTernan,
Ms. Tinker, Mr. Carfora and Ms. Sanders, respectively, have the right to
acquire pursuant to stock options currently exercisable or which will
become exercisable within 60 days.
(5) This amount includes shares held directly, including restricted shares
and shares allocated to the accounts of executive officers under the
ESOP, as well as shares held jointly with family members, in retirement
accounts, in a fiduciary capacity, by certain of the group members'
families, by certain related entities or by trusts of which the group
member is a trustee or substantial beneficiary, with respect to which
shares the group member may be deemed to have sole or shared voting
and/or investment powers. This amount also includes an aggregate of
336,250 shares which directors and executive officers as a group have the
right to acquire pursuant to stock options currently exercisable or which
will become exercisable within 60 days, and excludes 6,080 shares of
which Mario Teixeira, Jr., a director of the Company, disclaims
beneficial ownership.
PROPOSAL I. ELECTION OF DIRECTORS
General
The Company's Board of Directors currently consists of six members, each
of whom is also a director of the Bank. Each of the current directors of the
Company has served in such capacity since its incorporation in March 1994. The
Board is divided into three classes, each of which contains one-third of the
Board. One-third of the directors are elected annually. Directors of the Company
are generally elected to serve for three-year terms or until their respective
successors are elected and qualified.
3
<PAGE>
The following table sets forth certain information, as of September 5,
1997, regarding the composition of the Company's Board of Directors, including
each director's term of office. The Board of Directors acting as the nominating
committee has recommended and approved the nominees identified in the following
table. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to a nominee)
will be voted at the Meeting FOR the election of the nominees identified below.
If a nominee is unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute nominee as the Board of
Directors may recommend. At this time, the Board of Directors knows of no
reason why either nominee may be unable to serve, if elected. Except as
disclosed herein, there are no arrangements or understandings between the
nominee and any other person pursuant to which the nominee was selected.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Position(s) Held Director Term to Beneficially of
Name Age in the Company Since(1) Expire Owned(2) Class
- -------------------- --- ------------------ -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
NOMINEES
Joseph L. LaMonica 47 Director, President and 1987 2000 153,643 3.13%
Chief Executive Officer
Mario Teixeira, Jr. 61 Director 1971 2000 67,980(3) 1.40
DIRECTORS CONTINUING IN OFFICE
William C. Anderson 49 Chairman of the Board 1979 1998 157,787 3.21
Amadeu L. Carvalho 68 Director 1990 1998 36,522 0.76
Patrick D. McTernan 45 Director, Executive Vice 1989 1999 82,003 1.68
President, General
Counsel and Secretary
Marvin D. Schoonover 47 Director 1990 1999 29,482 0.61
</TABLE>
- -----------------------
(1) Includes service as a director of the Bank prior to the formation of the
Company.
(2) Amounts include shares held directly, including restricted shares, as well
as shares held jointly with family members, in retirement accounts, in a
fiduciary capacity, by certain members of the director's family, held by
certain related entities or held by trusts of which the director is a
trustee or substantial beneficiary, with respect to which shares the
respective director may be deemed to have sole or shared voting and/or
investment powers. Amounts also include 80,325, 21,220, 91,905, 14,280,
46,410 and 14,280 shares which Messrs. LaMonica, Teixeira, Anderson,
Carvalho, McTernan and Schoonover, respectively, have the right to acquire
pursuant to stock options currently exercisable or which will become
exercisable within 60 days. With respect to Messrs. LaMonica and McTernan,
amounts also include 3,817 shares which have been allocated to each of their
respective accounts under the ESOP.
(3) Amount excludes 6,080 shares of which Mr. Teixeira disclaims beneficial
ownership.
The principal occupation of each director of the Company and each of the
nominees for director is set forth below. All directors and nominees have held
their present principal occupation for at least five years unless otherwise
indicated.
Joseph L. LaMonica--Mr. LaMonica has been President and Chief Executive
Officer of the Company since its incorporation in March 1994, and of Penn
Federal since 1988. Mr. LaMonica has served Penn Federal in various capacities
since joining the Bank in 1980. He also is a member of the Board of Directors
of the Saint James Foundation, a philanthropic organization, and serves in an
advisory capacity to the Ironbound Ambulance Squad. He currently serves on the
Board of Governors of the New Jersey Savings League.
Mario Teixeira, Jr.--Mr. Teixeira has been a licensed funeral director
since 1961. He is owner and President of the Buyus Funeral Home in Newark and
owns the Bernauer Funeral Home and the Rucki Funeral Home, both located in
Newark, as well as the Shaw-Buyus Home for Services, located in Kearny, New
Jersey. In addition, Mr. Teixeira is a partner in BRSB Preneed Association, a
partnership specializing in funerals.
William C. Anderson--Mr. Anderson has been Chairman of the Board of the
Company since its incorporation
4
<PAGE>
in March 1994. Mr. Anderson is also the Chairman of the Board and President of
John Young Company, Inc., a real estate agency located in Caldwell, New Jersey.
Amadeu L. Carvalho--Mr. Carvalho, retired Controller of the Singer
Company, currently is in private accounting practice in Elizabeth, New Jersey.
His practice includes tax services and business and strategic planning for small
and medium size companies.
Patrick D. McTernan--Mr. McTernan has been Executive Vice President,
General Counsel and Secretary of the Company since its incorporation. He joined
Penn Federal in 1989 as Senior Vice President and General Counsel and was
promoted to Executive Vice President and General Counsel in 1992. He also
serves as corporate Secretary. Prior to his employment with the Bank, he was a
partner in the law firm of Adams and McTernan located in South Orange, New
Jersey. He is currently a member of the Legal Committee of the New Jersey
Savings League.
Marvin D. Schoonover--Mr. Schoonover is a Senior Account Executive with
the EMAR Group, Inc., an insurance agency located in Livingston, New Jersey, and
is responsible for the marketing, sales and servicing of commercial property and
casualty insurance. Mr. Schoonover first joined the EMAR Group, Inc. in 1980.
Mr. Schoonover also is a licensed real estate salesperson.
Meetings and Committees of the Board of Directors
Meetings and Committees of the Company. Meetings of the Company's Board
of Directors are generally held on a monthly basis. For the fiscal year ended
June 30, 1997, the Board of Directors met 16 times. During fiscal 1997, no
incumbent director of the Company attended fewer than 75% of the aggregate of
the total number of meetings held by the committees of the Board of Directors on
which he served. The Board of Directors of the Company has standing Executive
and Audit Committees.
The Executive Committee is comprised of all members of the Board. The
Executive Committee meets on an as needed basis and exercises the power of the
Board of Directors between Board meetings, to the extent permitted by Delaware
law. This Committee met once during fiscal 1997.
The Audit Committee is composed of Chairman Anderson (Chairman) and
Directors Carvalho and Teixeira. The Audit Committee reviews audit reports and
related matters to ensure effective compliance with regulatory and internal
policies and procedures. The Audit Committee met two times in fiscal 1997.
The entire Board of Directors acts as a nominating committee for
selecting nominees for election as directors. While the Board of Directors of
the Company will consider nominees recommended by stockholders, the Board has
not actively solicited such nominations. Pursuant to the Company's Bylaws,
nominations by stockholders generally must be delivered in writing to the
Secretary of the Company at least 30 days prior to the date of the Meeting. The
Board of Directors met one time during fiscal 1997 in its capacity as a
nominating committee.
Meetings and Committees of the Bank. The Bank's Board of Directors meets
twice monthly and may have additional special meetings upon the written request
of the Chairman of the Board, the President or at least three directors. The
Bank's Board of Directors met 25 times during the year ended June 30, 1997.
During fiscal 1997, no incumbent director of the Bank attended fewer than 75% of
the aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he served.
The Bank has standing Audit, Human Resources and Compensation Committees, as
well as other committees which meet periodically. Set forth below is a
description of certain committees of the Bank.
The Audit Committee is responsible for the oversight of the Bank's
Internal Audit Department and for the review of the Bank's annual audit report
prepared by the Bank's independent auditors. Only non-employee directors may
serve on the Audit Committee. The current members of the committee are Chairman
Anderson (Chairman) and Directors Carvalho and Teixeira. The Audit Committee met
five times during fiscal 1997.
The Bank's Human Resources Committee is responsible for the review and
approval of the numerous personnel policies of the Bank. This Committee
addresses, among other things, the Bank's benefit programs and plans and
5
<PAGE>
affirmative action plan. The current members of the Human Resources Committee
are Directors Teixeira (Chairman), Schoonover and LaMonica. The Committee met
two times during fiscal 1997.
The Bank's Compensation Committee, which acts as the compensation
committee of the Company and the Bank, determines salary ranges and incentive
compensation. This Committee is also responsible for administering the Stock
Option Plan and Management Recognition Plan (the "MRP"). The current members of
the Compensation Committee are Directors Carvalho (Chairman) and Teixeira. This
Committee met one time during the fiscal year ended June 30, 1997.
Director Compensation
The Company's directors are not paid fees for their service in such
capacity. Non-employee directors of the Bank were each paid a fee of $28,000 for
fiscal 1997 except for the Chairman who received $58,000. Each non-employee
director also received $350 for attendance at each meeting of the Board's
standing committees and $5,000 for the payment of an annual life insurance
premium. In addition, Chairman Anderson was awarded on July 23, 1996 an option
to purchase 62,475 shares of Common Stock at an exercise price of $15.875 per
share, with 40% of the option vesting immediately, 20% of the balance vesting on
April 28, 1997 and the remaining 40% scheduled to vest in equal installments on
April 28, 1998 and 1999, respectively. Chairman Anderson was also awarded on
July 23, 1996, 29,155 shares of restricted stock, with 40% of the stock vesting
immediately, 20% of the balance vesting on April 28, 1997 and the remaining 40%
scheduled to vest in equal installments on April 28, 1998 and 1999,
respectively.
6
<PAGE>
Executive Compensation
The following table sets forth information regarding compensation paid or
granted to the Named Officers.
<TABLE>
<CAPTION>
===============================================================================================================
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------
Long-Term
Compensation
-----------------------------
Annual Compensation Awards
- ---------------------------------------------------------------------------------------------------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Award(s) Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph L. LaMonica, 1997 $290,004 $29,000 $ --- --- $46,363
President and Chief 1996 290,004 29,000 --- --- 30,299
Executive Officer 1995 290,002 29,000 624,750(1) 133,875 25,152
Patrick D. McTernan, 1997 $181,500 $18,500 $ --- --- $40,859
Executive Vice President, 1996 181,500 --- --- --- 26,189
General Counsel and Secretary 1995 181,500 --- 281,138(1) 77,350 22,755
Lucy T. Tinker, 1997 $184,760 $18,500 $ --- --- $42,882
Executive Vice President and 1996 172,067 --- --- --- 28,338
Chief Operating Officer 1995 150,000 --- 281,138(1) 68,425 21,831
Jeffrey J. Carfora, 1997 $110,000 $ --- $ --- --- $32,385
Senior Vice President and 1996 110,000 --- --- --- 19,395
Chief Financial Officer 1995 97,981 25,000 56,228(1) 14,875 11,708
Barbara J. Sanders, 1997 $118,906 $ --- $ --- --- $34,584
Senior Vice President and 1996 117,412 --- --- --- 20,558
Lending Group Executive of the 1995 114,786 --- 56,228(1) 14,875 18,151
Bank
===============================================================================================================
</TABLE>
(1) Based on the $10.50 closing price per share of the Common Stock on the
Nasdaq National Market on October 28, 1994, the date of grant. The shares
of restricted stock shall vest in five equal annual installments
(beginning on April 28, 1995), subject to certain conditions. Dividends
are paid on the restricted shares to the extent and on the same date as
dividends are paid on all other outstanding shares of the Common Stock.
Based on the $27.25 closing price per share of the Common Stock on the
Nasdaq National Market on June 30, 1997, the 23,800, 10,710, 10,710,
2,142 and 2,142 restricted shares held by Mr. LaMonica, Mr. McTernan, Ms.
Tinker, Mr. Carfora and Ms. Sanders, respectively, as of June 30, 1997,
had aggregate market values of $648,550, $291,848, $291,848, $58,370 and
$58,370, respectively.
(2) Includes term life insurance premiums, income attributable under whole-
life insurance policy, employer contributions to Penn Federal's 401(k)
Plan and ESOP allocations, respectively, for fiscal 1997, 1996 and 1995
as follows: Mr. LaMonica - 1997: $892, $9,078, $2,732 and $33,661; 1996:
$1,577, $6,290, $2,248 and $20,184; 1995: $1,328, $3,637, $4,444 and
$15,743; Mr. McTernan - 1997: $700, $4,142, $2,356 and $33,661; 1996:
$900, $2,859, $2,246 and $20,184; and 1995: $900, $1,639, $4,473 and
$15,743; Ms. Tinker - 1997: $706, $7,129, $1,386 and $33,661; 1996: $893,
$5,030, $2,231 and $20,184 and 1995: $810, $3,028, $2,250 and $15,743;
Mr. Carfora - 1997: $462, $0, $1,650 and $30,273; 1996: $594, $0, $1,189
and $16,982 and 1995: $520, $0, $4,323 and $6,865; and Ms. Sanders -
1997: $498, $0, $1,786 and $32,300; 1996: $637, $0, $1,942 and $17,979;
and 1995: $610, $0, $4,159 and $13,382.
7
<PAGE>
The following table sets forth certain information concerning the number
and value of stock options at June 30, 1997 held by the Named Officers.
<TABLE>
<CAPTION>
=======================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at FY-End (#) FY-End ($)(1)
on Value -----------------------------------------------------------
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph L. LaMonica --- --- 80,325 53,550 $1,345,444 $896,963
- -------------------------------------------------------------------------------------------------------
Patrick D. McTernan --- --- 46,410 30,940 777,368 518,245
- -------------------------------------------------------------------------------------------------------
Lucy T. Tinker --- --- 41,055 27,370 687,671 458,448
- -------------------------------------------------------------------------------------------------------
Jeffrey J. Carfora --- --- 8,925 5,950 149,494 99,663
- -------------------------------------------------------------------------------------------------------
Barbara J. Sanders --- --- 8,925 5,950 149,494 99,663
=======================================================================================================
</TABLE>
(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the options granted based upon the exercise
price of the options ($10.50) and the closing price of the Common Stock
($27.25) on the Nasdaq National Market on June 30, 1997.
Employment Agreements
In connection with the Bank's mutual to stock conversion, the Bank entered
into employment agreements with Messrs. LaMonica and McTernan and Ms. Tinker.
Each employment agreement provides for an annual base salary in an amount not
less than the employee's then-current salary and an initial term of three years.
Each agreement provides for extensions of one year, in addition to the then-
remaining term under the agreement, on each anniversary of the effective date of
the agreement (i.e., each July 14), subject to a formal performance evaluation
performed by disinterested members of the Board of Directors of the Bank. Each
agreement provides for termination upon the employee's death, for cause or in
certain events specified by Office of Thrift Supervision ("OTS") regulations.
Each employment agreement is also terminable by the employee upon 90 days notice
to the Bank.
Each employment agreement provides for payment to the employee of the
greater of his or her salary for the remainder of the term of the agreement, or
299% of the employee's base compensation, in the event there is a "change in
control" of the Bank where employment terminates voluntarily or involuntarily in
connection with such change in control or within 12 months thereafter. This
termination payment is subject to reduction by the amount of all other
compensation to the employee deemed for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), to be contingent on a "change in control," and
may not exceed three times the employee's average annual compensation over the
most recent five year period or be non-deductible by the Bank for federal income
tax purposes. For the purposes of the employment agreements, a "change in
control" is defined as any event which would require the filing of an
application for acquisition of control or notice of change in control pursuant
to 12 C.F.R. (S)(S) 574.3 or 574.4. Such events are generally triggered prior to
the acquisition of control of 10% of the Company's common stock. Each agreement
also guarantees participation in an equitable manner in employee benefits
applicable to executive personnel.
Based on his or her current salary, if Mr. LaMonica, Mr. McTernan and Ms.
Tinker had been terminated as of June 30, 1997, under circumstances entitling
him or her to severance pay as described above, he or she would have been
entitled to receive a lump sum cash payment of approximately $1,252,432,
$711,034 and $633,526, respectively.
8
<PAGE>
Certain Transactions
The Bank has followed a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for consumer purposes. All loans by the Bank to
its senior officers and directors are subject to OTS regulations restricting
loans and other transactions with affiliated persons of the Bank. Under
applicable law, all loans or extensions of credit to executive officers and
directors must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
the general public and must not involve more than the normal risk of repayment
or present other unfavorable features. In this regard, all outstanding loans to
the Bank's directors and senior officers have been made in the ordinary course
of business and on the same terms, including collateral and interest rates, as
those prevailing at the time for comparable transactions and did not involve
more than the normal risk of collectibility.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the subsidiary Bank's Board of Directors has
furnished the following report on executive compensation:
Penn Federal's Compensation Committee has responsibility for reviewing the
compensation policies and plans for the subsidiary Bank and its affiliates. The
policies and plans established are designed to enhance both short-term and long-
term operational performance of the Bank and to build stockholder value through
anticipated appreciation in the Company's Common Stock price.
One of the Committee's primary objectives in the compensation area is to
develop and maintain compensation plans which provide the Bank with the means of
attracting and retaining quality executives at competitive compensation levels
and to implement compensation plans which seek to motivate executives to perform
to the full extent of their abilities and which seek to enhance stockholder
value by aligning closely the financial interests of the Company's executives
with those of its stockholders. In determining compensation levels, plans and
adjustments, the Committee takes into account, among other things, compensation
reviews made by third parties each year. These studies primarily compare the
compensation of the Bank's officers to officers of other local financial
institutions.
With respect to Mr. LaMonica's base salary in the fiscal year ended June
30, 1997, the Committee took into account a comparison of salaries of chief
executive officers of local financial institutions. Likewise, each executive
officer's base salary was determined utilizing financial institution
compensation surveys. Mr. LaMonica's base salary for fiscal year 1997 was
unchanged from the level set by the Committee for fiscal year 1996 because it
was the judgment of the Committee that the competitive salary data indicated
that Mr. LaMonica's base salary was appropriate for fiscal year 1997. The
Committee determined, however, based on numerous achievements during the past
fiscal year attributable to Mr. LaMonica resulting in the improvement of
performance by the Company, to award Mr. LaMonica a cash bonus of $29,000.
The Bank and the Company have included stock option and restricted stock
awards as key elements in its total compensation package. Equity based
compensation provides a long-term alignment of interests and results achieved
for stockholders with the compensation rewards provided to executive officers by
providing those executives and others on whom the continued success of the
Company most depends with a proprietary interest in the Company. In fiscal 1995,
the Stock Option Plan and the MRP were adopted providing for the grant of
several types of equity-based awards including stock option and restricted stock
awards. These plans were ratified by the Company's stockholders in fiscal 1995.
9
<PAGE>
In fiscal year 1995, all of the Bank's executive officers were granted
stock option and restricted stock awards, vesting over a five-year schedule.
Since the initial awards in fiscal 1995, no additional stock options or
restricted stock have been awarded to executive officers. Based upon the awards
of stock options and restricted stock and their respective vesting schedules,
26,775 stock options at an exercise price of $10.50 per share and 11,900 shares
of restricted stock vested for Mr. LaMonica in fiscal 1997.
Through the compensation programs described above, a significant portion of
the Bank's executive compensation is linked directly to individual and corporate
performance. The Committee will continue to review all elements of compensation
to ensure that the compensation objectives and plans meet the Company's business
objectives and philosophy of linking executive compensation to stockholder
interests of corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code to add Section 162(m)
to limit the corporate deduction for compensation paid to a corporation's five
most highly compensated officers to $1.0 million per executive per year, with
certain exemptions. The Committee carefully reviewed the impact of this
legislation on the cost of the Bank's current executive compensation plans.
Under the legislation and regulations adopted thereunder, it is not expected
that any portion of the Company's (or subsidiaries) employee remuneration will
be non-deductible in fiscal 1997 or in future years by reason of compensation
awards granted in fiscal 1997. The Committee intends to review the Company's
(and subsidiaries) executive compensation policies on an ongoing basis, and
propose appropriate modifications, if the Committee deems them necessary, to
these executive compensation plans with a view toward implementing the Company's
compensation policies in a manner that avoids or minimizes any disallowance of
tax deductions under Section 162(m).
The foregoing report is furnished by the Compensation Committee of the
Board of Directors:
Amadeu L. Carvalho, Chairman Mario Teixeira, Jr.
10
<PAGE>
Stock Performance Presentation
The line graph below compares the cumulative total stockholder return on
the Common Stock to the cumulative total return of a broad index (all Nasdaq
U.S. Stocks) and a savings and loan industry index for the period July 14, 1994
(the date the Company became a publicly-traded company) through June 30, 1997.
While the Company's Common Stock was sold at $10.00 per share in the initial
public offering, the stock closed at $13.125 per share on July 14, 1994, its
first day of trading. The graph assumes that $100 was invested on July 14, 1994
to purchase shares of the Common Stock at the closing price on such date and not
at the initial offering price.
PennFed Financial Services
Total Return Performance
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
---------------------------------------------------------------------
Index 7/15/94 12/31/94 6/30/95 12/31/95 6/30/96 12/31/96 6/30/97
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PennFed Financial Services 100.00 78.10 96.19 112.38 118.10 154.81 209.51
NASDAQ - Total US 100.00 105.22 131.20 148.80 168.45 183.01 204.85
SNL Thrift ($500M - $1B) 100.00 93.09 119.51 139.43 145.57 172.89 218.64
</TABLE>
11
<PAGE>
PROPOSAL II. APPROVAL OF AMENDMENT TO THE COMPANY'S
1994 STOCK OPTION AND INCENTIVE PLAN
The Stock Option Plan was approved by stockholders at the 1994 Annual
Meeting of Stockholders. The Stock Option Plan provides for the grant of a
variety of long-term incentive awards to directors, officers and key employees
as a means of enhancing and encouraging the recruitment and retention of those
individuals on whom the continued success of the Company most depends.
As of September 5, 1997, of the 595,000 shares of Common Stock reserved for
awards under the Stock Option Plan, all had been utilized for awards made under
the Stock Option Plan since its adoption and only 7,120 remained available for
additional awards (due to the expiration and forfeiture of unexercised stock
options held by certain persons who left the employ of the Bank subsequent to
receiving their awards). Without approval of the proposed amendment to reserve
additional shares, the Company will soon be unable to grant any stock options or
other awards under the Plan. The Board of Directors therefore recommends that
the stockholders approve an amendment to the Stock Option Plan in order to
increase by 240,623 (4.99% of the outstanding shares of Common Stock as of
September 5, 1997) the number of shares available for issuance under the Stock
Option Plan to meet anticipated needs for future grants to directors, officers
and employees of the Company and its subsidiaries. Approval of the amendment to
the Stock Option Plan requires the affirmative vote of a majority of the votes
cast on the proposal.
The principal features of the Stock Option Plan are discussed below.
General
The Stock Option Plan provides for awards in the form of stock options,
stock appreciation rights ("SARs") and limited stock appreciation rights
("Limited SARs"). Each award shall be on such terms and conditions, consistent
with the Stock Option Plan, as the committee administering the Stock Option Plan
may determine.
Shares may be either authorized but unissued shares or reacquired shares
held by the Company in its treasury. Any shares subject to an award which
expires or is terminated unexercised will again be available for issuance under
the Stock Option Plan. Generally, no award or any right or interest therein is
assignable or transferable except under certain limited exceptions set forth in
the Stock Option Plan.
The Stock Option Plan is administered by the Compensation Committee, which
must consist of at least two " Non-Employee Directors" (as defined in the Stock
Option Plan). Directors Carvalho and Teixeira have been appointed as the present
members of the Compensation Committee. In granting awards under the Stock Option
Plan, the Compensation Committee considers, among other things, position and
years of service, value of the individual's service to the Bank and the Company
and the added responsibilities of such individual as a director, officer or
employee of a public company.
Stock Options
The term of stock options will not exceed ten years from the date of grant.
The Compensation Committee may grant either "incentive stock options" as defined
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
or stock options not intended to qualify as such ("non-qualified stock
options").
In general, stock options will not be exercisable after the expiration of
their terms. Unless otherwise determined by the Compensation Committee, in the
event that a participant ceases to maintain continuous service (as defined in
the Stock Option Plan) to the Company, or one of its subsidiaries, for any
reason other than death or termination for cause, an exercisable stock option
will continue to be exercisable for three months but in no event after the
expiration date of the option. In the event of the death of a participant during
such service or within the three-month period following termination referred to
in the immediately preceding sentence, an exercisable option will continue to be
exercisable for one year, to the extent exercisable by the participant
immediately prior to his death, but in no event later than ten years after
grant. Following the death of any participant, the Compensation Committee may,
as an alternative means of settlement of an option, elect to pay to the holder
an amount of cash equal to the amount
12
<PAGE>
by which the market value of the shares covered by the option on the date of
exercise exceeds the exercise price. A stock option will automatically terminate
and will no longer be exercisable as of the date a participant is terminated for
cause.
Subject to certain limited exceptions, the exercise price for the purchase
of shares subject to a stock option at the date of grant may not be less than
100% of the market value of the shares covered by the option on that date. The
exercise price must be paid in full in cash or shares of Common Stock, or a
combination of both.
The Stock Option Plan provides that each director elected subsequent to the
Bank's mutual to stock conversion will automatically receive a non-qualified
stock option to purchase 100 shares of Common Stock as of the date he or she is
elected and has qualified, subject to availability. All such options will vest
ratably over a five-year period, beginning six months from the election date.
Stock Appreciation Rights
The Compensation Committee may grant SARs at any time, whether or not the
participant then holds stock options, granting the right to receive the excess
of the market value of the shares represented by the SARs on the date exercised
over the exercise price. SARs generally will be subject to the same terms and
conditions and exercisable to the same extent as stock options, as described
above. Upon the exercise of a SAR, the participant will receive the amount due
in cash or shares, or a combination of both, as determined by the Compensation
Committee. SARs may be related to stock options ("tandem SARs"), in which case
the exercise of one will reduce to that extent the number of shares represented
by the other.
SARs will require an expense accrual by the Company each year for the
appreciation on the SARs which it is anticipated will be exercised. The amount
of the accrual is dependent upon whether and the extent to which the SARs are
granted and the amount, if any, by which the market value of the SARs exceeds
the exercise price.
Limited Stock Appreciation Rights
Limited SARs will be exercisable only for a limited period in the event of
a tender or exchange offer for shares of the Common Stock, other than by the
Company, where 25% or more of the outstanding shares are acquired in that offer
or any other offer which expires within 60 days of that offer. The amount paid
on exercise of a Limited SAR will be the excess of (a) the market value of the
shares on the date of exercise, or (b) the highest price paid pursuant to the
offer, over the exercise price. Payment upon exercise of a Limited SAR will be
in cash.
Limited SARs may be granted at the time of, and must be related to, the
grant of a stock option or SAR. The exercise of one will reduce to that extent
the number of shares represented by the other. Limited SARs will be exercisable
only for the 45 days following the expiration of the tender or exchange offer,
during which period the related stock option or SAR will be exercisable.
Effect of Merger and Other Adjustments
Shares as to which awards may be granted under the Stock Option Plan, and
shares then subject to awards, will be adjusted by the Compensation Committee in
the event of any merger, consolidation, reorganization, recapitalization, stock
dividend, stock split or other change in the corporate structure of the Company.
In the case of any merger, consolidation or combination of the Company with
or into another company or other entity, whereby either the Company is not the
continuing entity or its outstanding shares are converted into or exchanged for
securities, cash or property, or any combination thereof pursuant to a plan or
agreement the terms of which are binding upon all stockholders, any participant
to whom a stock option, SAR or Limited SAR has been granted will have the right
(subject to other provisions of the Stock Option Plan) upon exercise of the
option, SAR or Limited SAR to an amount equal to the excess of the fair market
value on the date of exercise of the consideration receivable in the merger,
consolidation or combination with respect to the shares covered or represented
by the stock option, SAR or Limited SAR over the exercise price of the option,
SAR or Limited SAR multiplied by the number of shares with respect to which the
option, SAR or Limited SAR has been exercised.
13
<PAGE>
In addition, in the event of a tender or exchange offer (other than an
offer made by the Company) or if stockholders of the Company approve a
transaction pursuant to which the Company will cease to be an independent
publicly-owned entity or pursuant to which substantially all of its assets will
be sold, unless the Committee shall have otherwise provided in the applicable
award agreement, all outstanding stock options and SARs not fully exercisable
will become exercisable in full and remain so for a period of 60 days, after
which they will revert to being exercisable in accordance with their terms.
However, no stock option or SAR previously exercised or terminated shall be
exercisable.
Amendment and Termination
The Board of Directors of the Company may at any time amend, suspend or
terminate the Stock Option Plan or any portion thereof but may not, without the
prior approval of the stockholders, make any amendment which (i) materially
increases the aggregate number of shares of Common Stock which may be awarded
under the Stock Option Plan, (ii) materially increases the number of shares
which may be subject to awards to participants who are not employees, or (iii)
change the class of persons eligible to participate in the Stock Option Plan.
Unless previously terminated, the Stock Option Plan shall continue in effect for
a term of ten years, after which no further awards may be granted under the
Stock Option Plan.
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option Plan
will have the following consequences:
(1) The grant of an award will neither, by itself, result in the
recognition of taxable income to the participant nor entitle the Company to a
deduction at the time of such grant.
(2) The exercise of a stock option which is an "incentive stock option"
within the meaning of Section 422 of the Code will generally not, by itself,
result in the recognition of taxable income to the participant nor entitle the
Company to a deduction at the time of such exercise. However, the difference
between the exercise price and the fair market value of the option shares on the
date of exercise is an item of tax preference which may, in certain situations,
trigger the alternative minimum tax. The alternative minimum tax applies only
when it exceeds the regular income tax. If the shares acquired upon exercise of
an incentive stock option are not held for at least one year after transfer of
such shares to the participant or two years after the grant of the incentive
stock option, whichever is later, the participant will recognize ordinary income
or loss upon disposition of the shares in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise of the option. Upon such an event, the Company will be entitled to a
corresponding deduction in the amount of ordinary income, if any, recognized by
the participant, provided the Company meets its federal tax withholding
obligations. The participant will also recognize a capital gain or loss in an
amount equal to the difference, if any, between the sale price and the fair
market value of the shares on the date of exercise of the incentive stock
option; such capital gain or loss will be characterized as long-term if the
shares were held for more than one year after the date of exercise of the
incentive stock option. The Company will not be entitled to a corresponding
deduction for such capital gain or loss. If the shares are held by the
participant for one year after the incentive stock option is exercised and two
years after the incentive stock option was granted, the participant will
recognize a long-term capital gain or loss upon disposition of the shares in an
amount equal to the difference between the sale price and the exercise price.
The Company will not be entitled to a corresponding deduction for such capital
gain or loss. Long term capital gains for shares held between one year and 18
months are currently taxed at a maximum rate of 28%. Shares held for longer than
18 months are currently taxed at a maximum rate of 20%.
(3) The exercise of a stock option which is not an incentive stock option
(a "non-qualified stock option") will result in the recognition of ordinary
income by the participant on the date of exercise in an amount equal to the
difference between the exercise price and the fair market value on the date of
exercise of the shares acquired pursuant to the non-qualified stock option. The
Company will be allowed a deduction in the amount of any ordinary income
recognized by the participant upon exercise of a non-qualified stock option,
provided the Company meets its federal tax withholding obligations. Upon sale of
the shares acquired upon exercise of a non-qualified stock option, any
appreciation or depreciation in value of such shares from the time of exercise
will result in the recognition of a capital gain or loss by the participant. The
Company will not be entitled to a corresponding deduction for such capital gain
or loss. Such capital gain or loss will be long-term capital gain or loss if the
participant held the shares for more than one year following exercise of the
non-qualified stock option.
14
<PAGE>
(4) The exercise of a SAR will result in the recognition of ordinary
income by the participant on the date of exercise in an amount of cash, and/or
the fair market value on that date of the shares, acquired pursuant to the
exercise. Upon such an event, the Company will be entitled to a corresponding
deduction in the amount of ordinary income, if any, recognized by the
participant, provided the Company meets its federal tax withholding obligations.
Awards Under the Stock Option Plan
As of September 5, 1997, stock options had been awarded covering all
595,000 shares of Common Stock available for grant under the Stock Option Plan.
The table below sets forth the number of shares underlying options granted to
(i) each of the Named Officers; (ii) the executive officers of the Company and
the Bank as a group; (iii) all directors of the Company who are not executive
officers as a group; (iv) William C. Anderson, the Chairman of the Board; (v)
Mario Teixeira, Jr. a director of the Company; and (vi) all employees of the
Company and the Bank who are not executive officers, as a group. As of September
5, 1997, of the 595,000 shares underlying stock options awarded under the Stock
Option Plan, options covering 200 shares had been exercised by Mario Teixeira,
Jr., options covering 1,180 shares had been exercised by certain employees who
are not executive officers and options covering 7,120 shares had been forfeited
or expired due to persons leaving the employ of the Bank. The exercise price for
each option is $10.50 per share, except for options to purchase 19,300 and
62,475 shares granted to Chairman Anderson on July 22, 1997 and July 23, 1996,
respectively, as to which the exercise prices are $27.75 and $15.875 per share,
respectively. The closing price per share of the Common Stock on the Nasdaq
National Market on September 5, 1997 was $30.00 per share.
<TABLE>
<CAPTION>
================================================================================
1994 STOCK OPTION AND INCENTIVE PLAN
- --------------------------------------------------------------------------------
Number of Shares
Underlying
Name and Position Options/(1)/
- --------------------------------------------------------------------------------
<S> <C>
Joseph L. LaMonica, President and Chief
Executive Officer........................................... 133,875
Patrick D. McTernan, Executive Vice President,
General Counsel and Secretary............................... 77,350
Lucy T. Tinker, Executive Vice President and
Chief Operating Officer..................................... 68,425
Jeffrey J. Carfora, Senior Vice President and
Chief Financial Officer..................................... 14,875
Barbara J. Sanders, Senior Vice President and
Lending Group Executive..................................... 14,875
Executive Officer Group (6 persons).......................... 324,275
Non-Executive Director Group (4 persons)..................... 236,475
William C. Anderson, Chairman of the Board................... 153,175
Mario Teixeira, Jr., Director................................ 35,700
Non-Executive Officer Employee Group (152 persons)........... 34,250
================================================================================
</TABLE>
(1) Includes shares underlying both exercisable and unexercisable options.
Except with respect to the options to purchase 19,300 and 62,475 shares
granted on July 22, 1997 and July 23,1996, respectively, to Chairman
Anderson, 60% of each option vested in equal installments on April 28,
1995, 1996 and 1997, respectively, with the remaining 40% scheduled to vest
in equal installments on April 28, 1998 and 1999. Sixty percent of the
option granted to Chairman Anderson in July 1997 vested upon grant, with
the remaining 40% scheduled to vest in equal installments on April 28, 1998
and 1999, respectively. Forty percent of the option granted to Chairman
Anderson in July 1996 vested upon grant, with 20% of the balance having
vested on April 28, 1997 and the remaining 40% scheduled to vest in equal
installments on April 28, 1998 and 1999, respectively.
15
<PAGE>
PROPOSAL III. RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has renewed the Company's arrangement for Deloitte &
Touche LLP to be its auditors for the 1998 fiscal year, subject to the
ratification of the appointment by the Company's stockholders. A representative
of Deloitte & Touche LLP is expected to attend the Meeting to respond to
appropriate questions and will have an opportunity to make a statement if he or
she so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
the next Annual Meeting of Stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's administrative office located
at 622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989, no later than May
29, 1998. Any such proposal shall be subject to the requirements of the proxy
rules adopted under the Exchange Act.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons owning more than 10% of a registered class of the
Company's equity securities, to file periodic reports of ownership and changes
in ownership with the Securities and Exchange Commission and to provide the
Company with copies of such reports. Based solely upon information provided to
the Company by the directors and officers subject to Section 16(a), all Section
16(a) filing requirements applicable to such persons were complied with during
fiscal 1997.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company and/or the Bank may
solicit proxies personally or by telegraph or telephone without additional
compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William C. Anderson
William C. Anderson
Chairman of Board
West Orange, New Jersey
September 26, 1997
16
<PAGE>
PENNFED FINANCIAL SERVICES, INC.
1994 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
------------
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers and employees of the Corporation
and its Affiliates. It is intended that designated Options granted pursuant to
the provisions of this Plan to persons employed by the Corporation or its
Affiliates will qualify as Incentive Stock Options. Options granted to persons
who are not employees will be Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
-----------
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Bank" - means Penn Federal Savings Bank and any successor entity.
"Award" - means the grant of an Incentive Stock Option, a Non-
Qualified Stock Option, a Stock Appreciation Right or a Limited Stock
Appreciation Right, or any combination thereof, as provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, officer or employee of
the Corporation or an Affiliate, except that when used with respect to persons
granted an Incentive Option means the absence of any interruption or termination
of service as an employee of the Corporation or an Affiliate. Service shall not
be considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Corporation or in the case of transfers between
payroll locations of the Corporation or between the Corporation, its parent, its
subsidiaries or its successor. With respect to any advisory director, continuous
service shall plan mean availability to perform such functions as may be
required of the Bank's advisory directors.
"Corporation" - means PennFed Financial Services, Inc., a Delaware
corporation.
"Employee" - means any person, including an officer or director, who
is employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of 1974,
as amended.
"Exercise Price" - means (i) in the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon exercise
of such Option and (ii) in the case of a Right, the price per Share (other than
the Market Value per Share on the date of exercise and the
<PAGE>
Offer Price per Share as defined in Section 10 hereof) which, upon grant, the
Committee determines shall be utilized in calculating the aggregate value which
a Participant shall be entitled to receive pursuant to Sections 9, 10 or 12
hereof upon exercise of such Right.
"Incentive Stock Option" - means an option to purchase Shares granted
by the Committee pursuant to Section 6 hereof which is subject to the
limitations and restrictions of Section 8 hereof and is intended to qualify
under Section 422 of the Code.
"Limited Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 10
hereof.
"Market Value" - means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) of a Share on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the National Association of Securities
Dealers, Inc., Automated Quotations System, or any similar system then in use,
or, if no such quotations are available, the fair market value on such date of a
Share as the Committee shall determine.
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a tax-
qualified retirement plan); c) has not been an officer of the Corporation; d)
does not receive remuneration from the Corporation in any capacity other than as
a director; and e) does not possess an interest in any other transactions or is
not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof, which option is not
intended to qualify under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" - means any officer or employee of the Corporation or
any Affiliate who is selected by the Committee to receive an Award and any
director or advisory director of the Corporation who is granted an Award
pursuant to Section 20 hereof.
"Plan" - means the 1994 Stock Option and Incentive Plan of the
Corporation.
"Related" - means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in lieu
of, an Option or another Right and (ii) in the
2
<PAGE>
case of an Option, an Option with respect to which and to the extent a Right is
exercisable, in whole or in part, in lieu thereof has been granted.
"Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.
"Shares" - means the shares of common stock of the Corporation.
"Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 9 hereof.
"Ten Percent Beneficial Owner" - means the beneficial owner of more
than ten percent of any class of the Corporation's equity securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
3. Administration. The Plan shall be administered by a Committee
--------------
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.
4. Participation in Committee Awards. The Committee may select from time
---------------------------------
to time Participants in the Plan from those directors, advisory directors,
officers and employees of the Corporation or its Affiliates who, in the opinion
of the Committee, have the capacity for contributing to the successful
performance of the Corporation or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
----------------------
Section 11 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 595,000 shares. The Shares with respect to which
Awards may be made under the Plan may be either authorized and unissued shares
or issued shares heretofore or hereafter reacquired and held as treasury shares.
Shares which are subject to Related Rights and Related Options shall be counted
only once in determining whether the maximum number of Shares with respect to
which Awards may be granted under the Plan has been exceeded. An Award shall not
be considered to have been made under the Plan with respect to any Option or
Right which terminates, and new Awards may be granted under the Plan with
respect to the number of Shares as to which such termination or forfeiture has
occurred.
3
<PAGE>
6. General Terms and Conditions of Options and Rights. The Committee
--------------------------------------------------
shall have full and complete authority and discretion, except as expressly
limited by the Plan, to grant Options and/or Rights and to provide the terms and
conditions (which need not be identical among Participants) thereof. In
particular, the Committee shall prescribe the following terms and conditions:
(i) the Exercise Price of any Option or Right, which shall not be less than the
Market Value per Share at the date of grant of such Option or Right, (ii) the
number of Shares subject to, and the expiration date of, any Option or Right,
which expiration date shall not exceed ten years from the date of grant, (iii)
the manner, time and rate (cumulative or otherwise) of exercise of such Option
or Right, and (iv) the restrictions, if any, to be placed upon such Option or
Right or upon Shares which may be issued upon exercise of such Option or Right.
The Committee may, as a condition of granting any Option or Right, require that
a Participant agree not to thereafter exercise one or more Options or Rights
previously granted to such Participant. Notwithstanding the foregoing, no
individual shall be granted Awards with respect to more than 200,000 Shares in
any calendar year.
7. Exercise of Options or Rights.
-----------------------------
(a) Except as provided herein, an Option or Right granted under the
Plan shall be exercisable during the lifetime of the Participant to whom such
Option or Right was granted only by such Participant and, except as provided in
paragraphs (c) and (d) of this Section 7, no such Option or Right may be
exercised unless at the time such Participant exercises such Option or Right,
such Participant has maintained Continuous Service since the date of grant of
such Option or Right.
(b) To exercise an Option or Right under the Plan, the Participant to
whom such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial exercises
have been permitted by the Committee, by specifying the number of Shares with
respect to which such Participant elects to exercise such Option or Right)
together with full payment of the Exercise Price, if any and to the extent
required. The date of exercise shall be the date on which such notice is
received by the Corporation. Payment, if any is required, shall be made either
(i) in cash (including check, bank draft or money order) or (ii) by delivering
(A) Shares already owned by the Participant and having a fair market value equal
to the applicable exercise price, such fair market value to be determined in
such appropriate manner as may be provided by the Committee or as may be
required in order to comply with or to conform to requirements of any applicable
laws or regulations, or (B) a combination of cash and such Shares.
(c) If a Participant to whom an Option or Right was granted shall
cease to maintain Continuous Service for any reason (including total or partial
disability and normal or early retirement, but excluding death and termination
of employment by the Corporation or any Affiliate for cause), such Participant
may, but only within the period of three months immediately succeeding such
cessation of Continuous Service and in no event after the expiration date of
such Option or Right, exercise such Option or Right to the extent that such
Participant was entitled to exercise such Option or Right at the date of such
cessation, provided, however, that such right of exercise after cessation of
Continuous Service shall not be available to a Participant if the Committee
otherwise determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right. If the Continuous Service of a
Participant to whom an Option or Right was granted by the Corporation is
terminated for cause, all rights under any Option or Right of such Participant
shall expire immediately upon the giving to the Participant of notice of such
termination.
4
<PAGE>
(d) In the event of the death of a Participant while in the
Continuous Service of the Corporation or an Affiliate or within the three month
period referred to in paragraph (c) of this Section 7, the person to whom any
Option or Right held by the Participant at the time of his death is transferred
by will or the laws of descent and distribution, or in the case of an Award
other than an Incentive Stock Option, pursuant to a qualified domestic relations
order, as defined in the Code or Title 1 of ERISA or the rules thereunder may,
but only to the extent such Participant was entitled to exercise such Option or
Right immediately prior to his death, exercise such Option or Right at any time
within a period of one year succeeding the date of death of such Participant,
but in no event later than ten years from the date of grant of such Option or
Right. Following the death of any Participant to whom an Option was granted
under the Plan, irrespective of whether any Related Right shall have theretofore
been granted to the Participant or whether the person entitled to exercise such
Related Right desires to do so, the Committee may, as an alternative means of
settlement of such Option, elect to pay to the person to whom such Option is
transferred by will or by the laws of descent and distribution, or in the case
of an Option other than an Incentive Stock Option, pursuant to a qualified
domestic relations order, as defined in the Code or Title I of ERISA or the
rules thereunder, the amount by which the Market Value per Share on the date of
exercise of such Option shall exceed the Exercise Price of such Option,
multiplied by the number of Shares with respect to which such Option is properly
exercised. Any such settlement of an Option shall be considered an exercise of
such Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only
-----------------------
to Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted, (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution, and shall be exercisable during such Participant's lifetime only
by such Participant, (iv) no Incentive Stock Option shall be granted to any
individual who, at the time such Incentive Stock Option is granted, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Affiliate unless the Exercise Price
of such Incentive Stock Option is at least 110 percent of the Market Value per
Share at the date of grant and such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted, and (v) the aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by a Participant in any
calendar year shall not exceed $100,000.
9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon its
-------------------------
exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation
5
<PAGE>
Right may be Related to an Option or may be granted independently of any Option
as the Committee shall from time to time in each case determine. At the time of
grant of an Option the Committee shall determine whether and to what extent a
Related Stock Appreciation Right shall be granted with respect thereto;
provided, however, and notwithstanding any other provision of the Plan, that if
the Related Option is an Incentive Stock Option, the Related Stock Appreciation
Right shall satisfy all the restrictions and limitations of Section 8 hereof as
if such Related Stock Appreciation Right were an Incentive Stock Option and as
if other rights which are Related to Incentive Stock Options were Incentive
Stock Options. In the case of a Related Option, such Related Option shall cease
to be exercisable to the extent of the Shares with respect to which the Related
Stock Appreciation Right was exercised. Upon the exercise or termination of a
Related Option, any Related Stock Appreciation Right shall terminate to the
extent of the Shares with respect to which the Related Option was exercised or
terminated.
10. Limited Stock Appreciation Rights. At the time of grant of an Option
----------------------------------
or Stock Appreciation Right to any Participant, the Committee shall have full
and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right; provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Limited Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Limited Stock Appreciation
Right were an Incentive Stock Option and as if all other Rights which are
Related to Incentive Stock Options were Incentive Stock Options. Notwithstanding
any other provision of the Plan, a Limited Stock Appreciation Right shall be
exercisable only during the period beginning on the first day following the date
of expiration of any "offer" (as such term is hereinafter defined) and ending on
the forty-fifth day following such date.
A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to receive
an amount of cash equal to the amount by which the "Offer Price per Share" (as
such term is hereinafter defined) or the Market Value on the date of such
exercise, as shall have been provided by the Committee in its discretion at the
time of grant, shall exceed the Exercise Price of such Limited Stock
Appreciation Right, multiplied by the number of Shares with respect to which
such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to be exercisable to the extent of
the Shares with respect to which such Limited Stock Appreciation Right was
exercised. Upon the exercise or termination of a Related Option or Related
Stock Appreciation Right, any Related Limited Stock Appreciation Right shall
terminate to the extent of the Shares with respect to which such Related Option
or Related Stock Appreciation Right was exercised or terminated.
For the purposes of this Section 10, the term "Offer" shall mean any tender
offer or exchange offer for Shares other than one made by the Corporation,
provided that the corporation, person or other entity making the offer acquires
pursuant to such offer either (i) 25% of the Shares outstanding immediately
prior to the commencement of such offer or (ii) a number of Shares which,
together with all other Shares acquired in any tender offer or exchange offer
(other than one made by the Corporation) which expired within sixty days of the
expiration date of the offer in question, equals 25% of the Shares outstanding
immediately prior to the commencement of the offer in question. The term "Offer
Price per Share" as used in this Section 10 shall mean the highest price per
Share paid
6
<PAGE>
in any Offer which Offer is in effect any time during the period beginning on
the sixtieth day prior to the date on which a Limited Stock Appreciation Right
is exercised and ending on the date on which such Limited Stock Appreciation
Right is exercised. Any securities or property which are part or all of the
consideration paid for Shares in the Offer shall be valued in determining the
Offer Price per Share at the higher of (A) the valuation placed on such
securities or property by the corporation, person or other entity making such
Offer or (B) the valuation placed on such securities or property by the
Committee.
11. Adjustments Upon Changes in Capitalization. In the event of any
------------------------------------------
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, re capitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
12. Effect of Merger. In the event of any merger, consolidation or
----------------
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation (except to the extent that dissenting stockholders may be entitled,
under statutory provisions or provisions contained in the certificate of
incorporation, to receive the appraised or fair value of their holdings), any
Participant to whom an Option or Right has been granted shall have the right
(subject to the pro visions of the Plan and any limitation applicable to such
Option or Right), thereafter and during the term of each such Option or Right,
to receive upon exercise of any such Option or Right an amount equal to the
excess of the fair market value on the date of such exercise of the securities,
cash or other property, or combination thereof, receivable upon such merger,
consolidation or combination in respect of a Share over the Exercise Price of
such Right or Option, multiplied by the number of Shares with respect to which
such Option or Right shall have been exercised. Such amount may be payable
fully in cash, fully in one or more of the kind or kinds of property payable in
such merger, consolidation or combination, or partly in cash and partly in one
or more of such kind or kinds of property, all in the discretion of the
Committee.
13. Effect of Change in Control. If a tender offer or exchange offer for
---------------------------
Shares (other than such an offer by the Corporation) is commenced, or if the
stockholders of the Corporation shall approve an agreement providing either for
a transaction in which the Corporation will cease to be an independent publicly
owned entity or for a sale or other disposition of all or substantially all the
assets of the Corporation or the Bank, unless the Committee shall have otherwise
provided in the instrument evidencing the grant of an Option or Stock
Appreciation Right, all Options and Stock Appreciation Rights theretofore
granted and not fully exercisable shall become exercisable in full upon the
happening of such event and shall remain so exercisable for a period of sixty
days following such date, after which they shall revert to being exercisable in
accordance with their terms; provided, however, that no Option or Stock
Appreciation Right which has previously been exercised or otherwise terminated
shall become exercisable.
7
<PAGE>
14. Assignments and Transfers. No Award nor any right or interest of a
-------------------------
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or in the case of
Awards other than Incentive Stock Options pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder.
15. Employee Rights Under the Plan. No director, officer or employee
------------------------------
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the Corporation
or any Affiliate.
16. Delivery and Registration of Stock. The Corporation's obligation to
----------------------------------
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any
representation requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such representation under
such Securities Act or other securities legislation. The Corporation shall not
be required to deliver any Shares under the Plan prior to (i) the admission of
such shares to listing on any stock exchange on which Shares may then be listed,
and (ii) the completion of such registration or other qualification of such
Shares under any state or Federal law, rule or regulation, as the Committee
shall determine to be necessary or advisable.
17. Withholding Tax. The Corporation shall have the right to deduct from
---------------
all amounts paid in cash with respect to the exercise of a Right under the Plan
any taxes required by law to be withheld with respect to such cash payments.
Where a Participant or other person is entitled to receive Shares pursuant to
the exercise of an Option or Right pursuant to the Plan, the Corporation shall
have the right to require the Participant or such other person to pay the
Corporation the amount of any taxes which the Corporation is required to
withhold with respect to such Shares.
18. Amendment or Termination. The Board of Directors of the Corporation
------------------------
may amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section 11 hereof) no amendment shall be made without
approval of the stockholders of the Corporation which shall (i) materially
increase the aggregate number of Shares with respect to which Awards may be made
under the Plan, (ii) materially increase the aggregate number of Shares which
may be subject to Awards to Participants who are not Employees or (iii) change
the class of persons eligible to participate in the Plan; provided, however,
that no such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
19. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
its approval by the stockholders of the Corporation. It shall continue in
effect for a term of ten years unless sooner terminated under Section 18 hereof.
8
<PAGE>
20. Initial Grant. By, and simultaneously with, the approval of the Plan
-------------
by the stockholders of the Corporation, each member of the Board of Directors of
the Corporation at the time of the Bank's conversion to stock form who is not an
Employee, is hereby granted a ten year, Non-Qualified Stock Option to purchase a
number of shares, at an Exercise Price per share equal to the Market Value on
the date of grant (which shall be the date of stockholder approval of the Plan),
set forth opposite such Director's name below:
<TABLE>
<S> <C>
Anderson 71,400
Teixeira 35,700
Schoonover 23,800
Carvalho 23,800
</TABLE>
In addition, each non-employee director of the Corporation elected after
the completion of the Bank's conversion to stock form is hereby granted as of
the date he or she is elected and qualified ("election date") a ten year Non-
Qualified Stock Option to purchase 100 shares at the applicable Market Value on
the election date. All options shall vest ratably over a five-year period,
beginning six months from the date of stockholder approval or the election date,
as applicable. Each such Option shall be evidenced by a Non-Qualified Stock
Option Agreement in a form approved by the Board of Directors and shall be
subject in all respects to the terms and conditions of this Plan, which are
controlling.
9
<PAGE>
REVOCABLE PROXY
PENNFED FINANCIAL SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
October 24, 1997
The undersigned hereby appoints the Board of Directors of PennFed Financial
Services, Inc. (the "Company"), and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held on Friday,
October 24, 1997 at the Radisson Hotel, located at 690 Route 46 East, Fairfield,
New Jersey, at 10:00 a.m., local time, and at any and all adjournments thereof,
as follows:
<TABLE>
<CAPTION>
I. The election of the following
directors for three-year terms:
FOR WITHHOLD FOR ALL EXCEPT
----- -------- --------------
<S> <C> <C> <C>
JOSEPH L. LAMONICA MARIO TEIXEIRA, JR. [_] [_] [_]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- ------------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
----- ------- -------
<S> <C> <C> <C>
II. The approval of an amendment [_] [_] [_]
to the Company's 1994 Stock
Option and Incentive Plan to
increase the number of shares of
common stock reserved for awards
thereunder from 595,000 to 835,623.
FOR AGAINST ABSTAIN
----- ------- -------
<S> <C> <C> <C>
III. The ratification of the [_] [_] [_]
appointment of Deloitte &
Touche LLP as independent
auditors for the Company
for the fiscal year ending
June 30, 1998.
</TABLE>
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR"
the listed proposals.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company, prior to the
execution of this Proxy, of Notice of the Meeting, a Proxy Statement and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 1997.
Dated:
-------------------------
--------------------------- ---------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
--------------------------- ---------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears above on this
card. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
---------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
---------------------------------------------------------
