[FIRST NILES FINANCIAL, INC. LETTERHEAD]
March 15, 2000
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of First Niles
Financial, Inc., we cordially invite you to attend the annual meeting of the
First Niles Financial, Inc. shareholders. The meeting will be held at 2:00 p.m.
local time, on Wednesday, April 19, 2000 at our office located at 55 North Main
Street, Niles, Ohio. The annual meeting will include management's report to you
on the Company's 1999 financial and operating performance.
An important aspect of the annual meeting process is the annual
shareholder vote on corporate business items. I urge you to exercise your rights
as a shareholder to vote and participate in this process.
Whether or not you plan to attend the annual meeting, PLEASE READ THE
ENCLOSED PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT IN THE ACCOMPANYING POSTPAID RETURN ENVELOPE PROVIDED 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 success of
First Niles Financial, Inc. and the enhancement of your investment. As Chairman
of the Board, President and Chief Executive Officer, I want to express my
appreciation for your confidence and support.
Very truly yours,
/s/ William L. Stephens
WILLIAM L. STEPHENS
CHAIRMAN OF THE BOARD, PRESIDENT AND CEO
FIRST NILES FINANCIAL, INC.
55 NORTH MAIN STREET
NILES, OHIO 44446
(330) 652-2539
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 19, 2000
Notice is hereby given that the Annual Meeting of Shareholders of First
Niles Financial, Inc. will be held at the company's office located at 55 North
Main Street, Niles, Ohio, on April 19, 2000, at 2:00 p.m. local time. At the
annual meeting, shareholders will be asked to consider and vote on the following
proposals:
Proposal I. Election of two directors, each with a term of three
years; and
Proposal II. The ratification of the appointment of Anness, Gerlach &
Williams as independent auditors for the Company for the
year ending December 31, 2000.
Shareholders also will transact such other matters as may properly come before
the annual meeting, or any adjournments or postponements thereof. We are not
aware of any other business to come before the meeting.
The record date for the annual meeting is February 25, 2000. Only
shareholders of record at the close of business on that date are entitled to
notice of and to vote at the annual meeting or any adjournment or postponement
thereof. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSALS.
A proxy card and proxy statement for the annual meeting are enclosed.
Whether or not you plan to attend the annual meeting, please take the time to
vote by signing, dating and mailing the enclosed proxy card which is solicited
on behalf of the Board of Directors. The proxy will not be used if you attend
and vote at the annual meeting in person. REGARDLESS OF THE NUMBER OF SHARES YOU
OWN, YOUR VOTE IS VERY IMPORTANT.
PLEASE ACT TODAY.
Thank you for your continued interest and support.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William L. Stephens
WILLIAM L. STEPHENS
CHAIRMAN OF THE BOARD, PRESIDENT AND CEO
Niles, Ohio
March 15, 2000
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING. A PRE-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
FIRST NILES FINANCIAL, INC.
55 NORTH MAIN STREET
NILES, OHIO 44446
(330) 652-2539
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 19, 2000
--------------------
INTRODUCTION
The First Niles Financial, Inc. Board of Directors is using this proxy
statement to solicit proxies from the holders of common stock of First Niles
Financial, Inc. for use at the Company's Annual Meeting of Shareholders. This
proxy statement and the enclosed form of proxy are first being mailed to our
shareholders on or about March 15, 2000. First Niles Financial, Inc. is referred
to in this proxy statement as "First Niles" or the "Company."
Certain of the information provided herein relates to Home Federal
Savings and Loan Association of Niles, a wholly owned subsidiary of First Niles.
Home Federal Savings and Loan Association of Niles is referred to in this proxy
statement as "Home Federal."
INFORMATION ABOUT THE ANNUAL MEETING
TIME AND PLACE OF THE ANNUAL MEETING
Our annual meeting will be held as follows:
DATE: April 19, 2000
TIME: 2:00 p.m., local time
PLACE: Home Federal Savings and Loan Association of Niles
55 North Main Street
Niles, Ohio 44446
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the annual meeting, shareholders of First Niles are being asked to
consider and vote upon the following proposals:
Proposal I. Election of two directors, each with a term of three
years; and
Proposal II. The ratification of the appointment of Anness, Gerlach &
Williams as independent auditors for the Company for the
year ending December 31, 2000.
The shareholders also will transact any other business that may properly come
before the annual meeting. As of the date of this proxy statement, we are not
aware of any other business to be presented for consideration at the annual
meeting other than the matters described in this proxy statement.
1
YOUR VOTING RIGHTS
We have fixed the close of business on February 25, 2000 as the record
date for the annual meeting. Only shareholders of record of First Niles common
stock on that date are entitled to notice of and to vote at the annual meeting.
You are entitled to one vote for each share of First Niles common stock you own.
On February 25, 2000, 1,667,349 shares of First Niles common stock were
outstanding and entitled to vote at the annual meeting.
We maintain an Employee Stock Ownership Plan ("ESOP") which owns
approximately 12.4 percent of First Niles common stock. Employees of First Niles
and Home Federal participate in the ESOP. Each ESOP participant instructs the
trustee of the plan how to vote the shares of First Niles common stock allocated
to his or her account under the ESOP. If an ESOP participant properly executes
the voting instruction card distributed by the ESOP trustee, the ESOP trustee
will vote such participant's shares in accordance with the shareholder's
instructions. Where properly executed voting instruction cards are returned to
the ESOP trustee with no specific instruction as how to vote at the annual
meeting, the trustee will vote the shares "FOR" the election of each of
management's director nominees and "FOR" the ratification of the appointment of
Anness, Gerlach & Williams as independent auditors for First Niles for the year
ending December 31, 2000. In the event the ESOP participant fails to give timely
voting instructions to the trustee with respect to the voting of the common
stock that is allocated to his or her ESOP account, the ESOP trustee shall vote
such shares "FOR" each of management's director nominees and "FOR" the
ratification of the appointment of Anness, Gerlach & Williams. The ESOP trustee
will vote the shares of First Niles common stock held in the ESOP but not
allocated to any participant's account in the same proportion as directed by the
ESOP participants who directed the trustee as to the manner of voting their
allocated shares in the ESOP with respect to each such proposal.
If you are the beneficial owner of shares held in "street name" by a
broker, your broker, as the record holder of the shares, is required to vote the
shares in accordance with your instructions. If you do not give instructions to
your broker, your broker will nevertheless be entitled to vote the shares with
respect to "discretionary" items, but will not be permitted to vote your shares
with respect to "non-discretionary" items. In the case of non-discretionary
items, the shares will be treated as "broker non-votes." Under The Nasdaq Stock
Market rules, both the election of directors and the ratification of auditors
are considered "discretionary" items and, therefore, your broker may vote your
shares without instructions from you.
Broker non-votes will be included for purposes of calculating the
presence of a quorum, which is necessary in order for us to conduct the meeting,
but are not otherwise counted as shares entitled to vote on a proposal.
VOTE REQUIRED TO APPROVE PROPOSALS
Directors are elected by a plurality of the votes cast, in person or by
proxy, at the annual meeting by holders of First Niles common stock. This means
that the two director nominees with the most affirmative votes will be elected
to fill the available seats. Shares that are represented by proxy which are
marked "vote withheld" for the election of one or more director nominees and
broker non-votes will have no effect on the vote on the election of directors.
If a director nominee is unable to stand for election, the Board of
Directors may either reduce the number of directors to be elected or select a
substitute nominee. If a substitute nominee is selected, the proxy holders will
vote your shares for the substitute nominee, unless you have withheld authority.
2
Ratification of the appointment of Anness, Gerlach & Williams as our
independent auditors for the fiscal year ending December 31, 2000 requires the
affirmative vote of the majority of shares cast, in person or by proxy, at the
annual meeting by holders of First Niles common stock. Shareholder abstentions
on the proposal to ratify the appointment of Anness, Gerlach & Williams as our
independent auditors will have the same effect as a vote against the proposal,
while broker non-votes will have no effect on the outcome of the vote.
THE FIRST NILES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" ELECTION OF EACH OF MANAGEMENT'S DIRECTOR NOMINEES AND "FOR" THE PROPOSAL
TO RATIFY ANNESS, GERLACH & WILLIAMS AS OUR INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2000.
HOW TO VOTE BY PROXY
You may vote in person at the annual meeting or by proxy. To ensure
your representation at the annual meeting, we recommend you vote by proxy even
if you plan to attend the annual meeting. You can always change your vote at the
meeting. See "-How to Revoke Your Proxy" below.
Voting instructions are included on your proxy card. Shares of First
Niles common stock represented by properly executed proxies will be voted by the
individuals named in such proxy in accordance with the shareholder's
instructions. Where properly executed proxies are returned to First Niles with
no specific instruction as how to vote at the annual meeting, the persons named
in the proxy will vote the shares "FOR" the election of each of management's
director nominees.
Voting instructions are included on your proxy card. If you properly
give your proxy and submit it to us in time to vote, the persons named as your
proxy will vote your shares as you have directed. You may vote "FOR" or
"AGAINST" the proposals set forth on your proxy card and described in this
document or "ABSTAIN" from voting. If you submit your proxy but do not make a
specific choice as to how to vote, your proxy will follow the First Niles
Board's recommendation and vote your shares "FOR" the election of each of
management's director nominees and "FOR" the proposal to ratify Anness, Gerlach
& Williams as our independent auditors for the fiscal year ending December 31,
2000.
The persons named in the proxy will have the discretion to vote on any
other business properly presented for consideration at the annual meeting in
accordance with their best judgment. We are not aware of any other matters to be
presented at the shareholders' annual meeting other than those described in the
Notice of Annual Meeting of Shareholders accompanying this document.
You may receive more than one proxy card depending on how your shares
are held. For example, you may hold some of your shares individually, some
jointly with your spouse and some in trust for your children -- in which case
you will receive three separate proxy cards to vote.
HOW TO REVOKE YOUR PROXY
You may revoke your proxy before it is voted by:
o submitting a new proxy with a later date,
o notifying the Corporate Secretary of First Niles in writing before
the annual meeting that you have revoked your proxy, or
o voting in person at the annual meeting.
3
If you plan to attend the annual meeting and wish to vote in person, we
will give you a ballot at the annual meeting. However, if your shares are held
in the name of your broker, bank or other nominee, you must bring a letter from
the nominee indicating that you were the beneficial owner of First Niles common
stock on February 25, 2000, the record date for voting at the annual meeting.
PROXY SOLICITATION COSTS
We will pay our own costs of soliciting proxies. In addition to this
mailing, our directors, officers and employees may also solicit proxies
personally, electronically or by telephone. We will also reimburse brokers and
other nominees for their expenses in sending these materials to you and
obtaining your voting instructions.
SHARE OWNERSHIP OF FIRST NILES FINANCIAL, INC. COMMON STOCK
The following table presents information regarding the beneficial
ownership of First Niles common stock as of February 25, 2000, by:
o those persons or entities (or group of affiliated persons or
entities) known by management to beneficially own more than five
percent of the outstanding common stock of First Niles;
o each director and director nominee of First Niles;
o each executive officer of First Niles named in the Summary
Compensation Table appearing under "Executive Compensation" below;
and
o all of the executive officers and directors of First Niles as a
group.
The persons named in this table have sole voting power for all shares
of common stock shown as beneficially owned by them, subject to community
property laws where applicable and except as indicated in the footnotes to this
table. The address of each of the beneficial owners, except where otherwise
indicated, is the same address as First Niles. An asterisk (*) in the table
indicates that an individual beneficially owns less than one percent of the
outstanding common stock of First Niles.
Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
outstanding options held by that person that are currently exercisable or
exercisable within 60 days after February 25, 2000 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
4
SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNERS OWNED(1) CLASS
----------------- -------- -----
FIRST NILES FINANCIAL, INC. EMPLOYEE STOCK OWNERSHIP PLAN 205,922(2) 12.4%
WILLIAM L. STEPHENS, CHAIRMAN OF THE BOARD, PRESIDENT AND CEO 74,781 4.4%
GEORGE J. SWIFT, DIRECTOR, VICE PRESIDENT AND SECRETARY 74,781(3) 4.4%
P. JAMES KRAMER, DIRECTOR 39,357(4) 2.4%
HORACE L. MCLEAN, DIRECTOR 12,289 *
RALPH A. ZUZOLO, SR., DIRECTOR 58,217(5) 3.5%
LAWRENCE SAFAREK, VICE PRESIDENT AND TREASURER 58,558 3.5%
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
AS A GROUP (6 persons) 317,983(6) 18.1%
- -----------------------------------------------------------------------
(1) Includes shares of common stock as to which the named individual has the
right to acquire beneficial ownership, currently or within 60 days of the
February 25, 2000 voting record date, pursuant to the exercise of stock
options, as follows:
Mr. Stephens - 23,392 shares Mr. Kramer - 5,848 shares Mr. Zuzolo - 5,848 shares
Mr. Swift - 23,392 shares Mr. McLean - 5,848 shares Mr. Safarek - 23,392 shares
(2) Represents shares held by the ESOP, 35,749 shares of which have been
allocated to accounts of participants. Pursuant to the terms of the ESOP,
each ESOP participant has the right to direct the voting of shares of
common stock allocated to his or her account. First Bankers Trust Company,
N.A., Quincy, Illinois, as 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.
(3) Includes shared beneficial ownership with respect to 30,000 shares of
common stock held in trust as to which Mr. and Mrs. Swift are co-trustees.
(4) Includes shared beneficial ownership with respect to 15,000 shares of
common stock held jointly by Mr. Kramer and his spouse and 15,000 shares
held by Mr. Kramer as custodian for his children.
(5) Includes shared beneficial ownership with respect to 14,800 shares of
common stock owned by a corporation of which Mr. Zuzolo is a shareholder.
Mr. Zuzolo disclaims beneficial ownership of the shares of common stock
owned by the corporation except to the extent of his pecuniary interest
therein.
(6) Includes shares held directly, as well as shares held jointly with family
members, shares held in retirement accounts, held in a fiduciary capacity,
held by certain of the group members' families, or held 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 87,720 shares of common
stock issuable upon exercise of the directors' and executive officers'
stock options.
PROPOSAL I - ELECTION OF DIRECTORS
Our Board of Directors consists of five members. Approximately
one-third of the directors are elected annually to serve for a three-year period
or until their respective successors are elected and qualified.
All of our nominees currently serve as First Niles directors.
The table below sets forth information regarding our Board of
Directors, including their age, position with First Niles and term of office. If
any director nominee is unable to serve before the election, your proxy
authorizes us to vote for a replacement nominee if our Board of Directors names
one. At this time, we are not aware of any reason why a nominee might be unable
to serve if elected. Except as disclosed in this proxy statement, there are no
arrangements or understandings between any nominee and any other person pursuant
5
to which such nominee was selected. THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE
"FOR" EACH OF THE DIRECTOR NOMINEES.
Term of
Director Office
Name Age(1) Position(s) Held Since(2) Expires
- -------------------------- ------- ------------------------------------------ -------- -------
NOMINEE
WILLIAM L. STEPHENS 68 Chairman of the Board, President and Chief 1969 2003
Executive Officer
GEORGE J. SWIFT 77 Director, Vice President and Secretary 1969 2003
DIRECTORS REMAINING IN OFFICE
P. JAMES KRAMER 44 Director 1994 2001
RALPH A. ZUZOLO, SR. 57 Director 1979 2001
HORACE L. MCLEAN 69 Director 1987 2002
- ------------------------------
(1) At December 31, 1999.
(2) Includes service as a director of Home Federal.
The principal occupation of each director of First Niles and each of
the nominees for director is set forth below. All directors and nominees have
held their present position for at least five years unless otherwise indicated.
WILLIAM L. STEPHENS. Mr. Stephens serves as Chairman of the Board,
President and Chief Executive Officer of Home Federal and First Niles. He has
served in such capacities for Home Federal since 1969 and for First Niles since
its inception in October 1998.
GEORGE J. SWIFT. Mr. Swift is Vice President and Secretary of Home
Federal and First Niles. He has served in such capacities with Home Federal
since 1969 and for First Niles since its inception in October 1998.
P. JAMES KRAMER. Since 1984, Mr. Kramer has served as President of
William Kramer & Son, a heating and air conditioning company, located in Niles,
Ohio.
RALPH A. ZUZOLO, SR. Mr. Zuzolo is an attorney and a principal in the
law firm of Zuzolo, Zuzolo & Zuzolo, located in Niles, Ohio. Mr. Zuzolo has been
with his law firm since 1968. Mr. Zuzolo is also the Chief Executive Officer of
American Title Services, Inc., a real estate title agency located in Niles,
Ohio.
HORACE L. MCLEAN. Since 1987, Mr. McLean has served as President of
McLean Engineering, Inc., a civil engineering company, located in Niles, Ohio.
6
MEETINGS AND COMMITTEES
MEETINGS
Meetings of the Board of Directors of First Niles are generally held on
a bi-monthly basis. Beginning in February 2000, the Board of Directors of First
Niles began meeting twice per month. Meetings of the Board of Directors of Home
Federal, the Company's wholly-owned operating subsidiary, are generally held
twice per month. The First Niles Board of Directors conducted four regular
meetings and eight special meetings during fiscal 1999. The Home Federal Board
of Directors conducted 24 regular meetings and two special meetings during
fiscal 1999. Each director attended at least 75% of the (i) First Niles Board
meetings and any committees on which he served and (ii) Home Federal Board
meetings and any committees on which he served.
COMMITTEES
The First Niles Board of Directors does not have standing audit,
compensation or nominating committee; rather, the entire Board of Directors is
responsible for these matters. First Niles currently does not pay any salaries
to its officers or employees; accordingly, all compensation matters, except for
stock-based compensation awards, are addressed by Home Federal.
The functions of the First Niles' Board in connection with the annual
audit and compensation matters are as follows:
o review significant financial information for the purpose of giving
added assurance that the information is accurate and timely and
that it includes all appropriate financial statement disclosures;
o ascertain the existence of effective accounting and internal
control systems;
o oversee the entire audit function both internal and independent;
o administer our stock option and incentive plan and recognition and
retention plan; and
o review overall compensation policies.
The Board of Directors met once during 1999 to discuss the annual audit
and twice to discuss compensation matters related to adoption of, and the grant
of awards under, the stock option and incentive plan and the recognition and
retention plan.
The entire Board of Directors selects nominees for election as
directors. Nominations of persons for election to the Board of Directors may be
made only by or at the direction of the Board of Directors or by any shareholder
entitled to vote for the election of directors who complies with the notice
procedures set forth in the bylaws of First Niles. Pursuant to the Company's
bylaws, nominations by shareholders must be delivered in writing to the
Secretary of First Niles at least 60 days prior to the date of the annual
meeting; provided, however, that in the event less than 70 days' notice of the
date of the annual meeting is given or made to shareholders, such nominations by
shareholders must be delivered to First Niles no later than the close of
business on the 10th day following the earlier of the day on which notice of the
date of the annual meeting was mailed or public announcement of the date of the
annual meeting was first made.
7
The entire Board of Directors of Home Federal is responsible for:
o determining salaries to be paid to its officers and employees,
based on recommendations of President Stephens and Vice President
Swift. President Stephens and Vice President Swift excuse
themselves from Board discussions concerning their salaries as
President and Vice President, respectively;
o overseeing the administration of our employee benefit plans
covering employees generally; and
o reviewing our compensation policies.
The Board of Directors met twice time during 1999 to discuss
compensation matters.
COMPENSATION OF DIRECTORS
The members of the Boards of Directors of First Niles and Home Federal
are identical. Directors of First Niles are not compensated for service on the
Company's Board of Directors. Directors of Home Federal, however, are
compensated for service on the Home Federal Board of Directors. During fiscal
2000, each director (employee and non-employee) of Home Federal is being paid a
fee of $450 for each meeting of the Board of Directors attended, with up to five
excused absences paid per year.
During fiscal 1999, each of our non-employee directors was granted
3,509 shares of First Niles common stock pursuant to the terms of our 1999
Recognition and Retention Plan and an option to purchase 8,772 shares of First
Niles common stock pursuant to the terms of our 1999 Stock Option and Incentive
Plan. These plans, as well as the stock and option grants, were approved by our
shareholders at the Company's special meeting of shareholders held on December
15, 1999.
Ralph A. Zuzolo, Sr., a director of First Niles and Home Federal, is a
partner in the law firm of Zuzolo, Zuzolo & Zuzolo, which firm acts as counsel
to Home Federal from time to time. The legal fees received by the law firm from
professional services rendered to Home Federal during the year ended December
31, 1999 did not exceed five percent of the firm's gross revenues.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth summary information concerning
compensation awarded to, earned by or paid to First Niles' chief executive
officer and its other executive officers, whose total salary and bonus exceeded
$100,000, for services rendered in all capacities during the fiscal year ended
December 31, 1999. Each of these officers received perquisites and other
personal benefits in addition to salary and bonus during the periods stated. The
aggregate amount of these perquisites and other personal benefits, however, did
not exceed the lesser of $50,000 or 10% of the total of their annual salary and
bonus and, therefore, has been omitted as permitted by the rules of the SEC. We
will use the term "named executive officers" from time to time in this proxy
statement to refer to the officers listed in the table below.
8
Long Term
Compensation
Annual Compensation Awards
------------------------------ ------------------------
Restricted
Stock Options/ All Other
Salary Bonus Awards SARs Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)
- --------------------------------- ---- ------------ ----------- ----------- -------- ------------
WILLIAM L. STEPHENS 1999 $142,440(1) $ 58,195(2) $116,365(3) 35,088 $19,196(4)
PRESIDENT AND CEO 1998 139,470(1) 92,331 --- --- 214,710
GEORGE J. SWIFT 1999 $142,440(1) $ 58,195(2) $116,365(3) 35,088 $19,196(4)
VICE PRESIDENT AND SECRETARY 1998 139,470(1) 92,331 --- --- 214,710
LAWRENCE SAFAREK 1999 $ 76,400 $ 58,195(2) $116,365(3) 35,088 $16,200(4)
VICE PRESIDENT AND TREASURER 1998 54,600 50,271 --- --- 18,096
- ---------------------------------
(1) Includes director fees of $11,700 in 1999 and $14,850 in 1998 for service
on the Home Federal Board of Directors.
(2) Represents the dollar value of 4,679 shares of common stock paid to each of
the named executive officers. The dollar value of the common stock is based
on the closing price of First Niles common stock as quoted on The Nasdaq
Stock Market on December 15, 1999, the date of the grant.
(3) Represents the aggregate dollar value of the award of 9,356 shares of First
Niles common stock on December 15, 1999, the date of the grant. At December
31, 1999, the aggregate dollar value of the restricted stock award was
$121,628. The dollar value of the award is based on the closing price of
First Niles common stock as quoted on The Nasdaq Stock Market on such
dates. The restricted stock award vests in two equal annual installments on
January 1, 2000 and January 1, 2001, subject to the named executive
officer's continuous employment with First Niles or Home Federal. The named
executive officers are entitled to receive all dividends paid on the
restricted shares.
(4) Represents Home Federal's annual contributions to the ESOP on behalf of
Messrs. Stephens, Swift and Safarek, respectively. Home Federal's ESOP
contributions on behalf of Messrs. Stephens, Swift and Safarek had a market
value of $74,906, $74,906 and $63,206, respectively, as of December 31,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock
options under our 1999 Stock Option and Incentive Plan made during the fiscal
year ended December 31, 1999 to the named executive officers. The amounts shown
for each named executive officer as potential realizable values are based on
arbitrarily assumed annualized rates of stock price appreciation of five percent
and ten percent over the full (i) ten-year term of the options, which would
result in stock prices of approximately $20.41 and $32.50, respectively, and
(ii) fifteen-year term of the options, which would result in stock prices of
approximately $26.05 and $52.34, respectively, for options with an exercise
price of $12.53. No gain to the optionees is possible without an increase in
stock price, which benefits all stockholders proportionately. These potential
realizable values are based solely on arbitrarily assumed rates of appreciation
required by applicable SEC regulations. Actual gains, if any, on option exercise
and common stock holdings depend upon the future performance of First Niles
common stock and overall stock market conditions. There can be no assurance that
the potential realizable values shown in this table will be achieved.
9
Potential Realizable
Value at Assumed
Annual Rates of Stock
Appreciation
Individual Grants for Option Terms
- ---------------------------------------------------------------------------------------------- -------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Granted Employees in Price Expiration 5% 10%
Name (#) Fiscal Year ($/Sh) Date ($) ($)
- ------------------------- --------------- ------------ -------- ---------- -------- --------
WILLIAM L. STEPHENS 23,940 18.2% $12.53 12-15-09 $188,647 $478,082
11,148 8.5 12.53 12-15-14 150,721 443,802
GEORGE J. SWIFT 23,940 18.2 12.53 12-15-09 188,647 478,082
11,148 8.5 12.53 12-15-14 150,721 443,802
LAWRENCE SAFAREK 23,940 18.2 12.53 12-15-09 188,647 478,082
11,148 8.5 12.53 12-15-14 150,721 443,802
The exercise price of the stock options granted to the named executive
officers shown above is equal to the mean between the closing bid and asked
quotations of the common stock on The Nasdaq Stock Market on the date the option
was granted. The stock options vest in three equal installments: the first
installment vested on December 15, 1999, the second installment vested on
January 1, 2000 and the final installment vests on January 1, 2001. Any
unexpired stock option will become exercisable, in whole or in part, without
regard to the date that such option would be first exercisable, if the named
executive officer is "involuntarily terminated," as that term is defined in his
employment agreement. See "Employment Agreements" below. If the named executive
officer's service with us is terminated for cause, all of his rights under any
unexercised stock option expires immediately upon such notice of termination.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table summarizes for each of the named executive officers
certain information relating to stock options exercised by them during the
fiscal year ended December 31, 1999 and the value of such options at December
31, 1999. Value realized upon exercise is the difference between the fair market
value of the underlying stock on the exercise date and the exercise or base
price of the option. The value of an unexercised, in-the-money option at fiscal
year-end is the difference between its exercise or base price and the fair
market value of the underlying stock on December 31, 1999, which was $13.00 per
share, based on the closing price of First Niles common stock as reported on the
Nasdaq Stock Market. These values, unlike the amounts set forth in the column
"Value Realized," have not been, and may never be, realized. These options have
not been, and may not ever be, exercised. Actual gains, if any, on exercise will
depend on the value of First Niles common stock on the date of exercise. There
can be no assurance that these values will be realized. Unexercisable options
are those which have not yet vested.
10
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)
----------------------------- -------------------------------
Shares
Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
WILLIAM L. STEPHENS --- --- 11,696 23,392 $5,497 $10,994
GEORGE J. SWIFT --- --- 11,696 23,392 5,497 10,994
LAWRENCE SAFAREK --- --- 11,696 23,392 5,497 10,994
EMPLOYMENT AGREEMENTS
On October 26, 1998, Home Federal entered into employment agreements
with President Stephens, and Vice Presidents Swift and Safarek. The employment
agreements provide for an annual base salary in an amount not less than the
employee's then current salary. The initial term of each of the employment
agreements is for three years. The agreements provide for extensions of one
year, in addition to the then- remaining term under the agreements, on each
anniversary of the effective date of the agreements. All extensions are subject
to a formal performance evaluation performed by disinterested members of the
Board of Directors of Home Federal. The agreements grant participation in an
equitable manner in discretionary bonuses as well as employee benefits
applicable to executive personnel. The agreements do not contain a change in
control provision.
The agreements provide for termination upon the employee's death or
disability, for cause or in certain events specified by Office of Thrift
Supervision regulations. If the employment of the employee is "involuntarily
terminated," other than for the reasons set forth in the preceding sentence, the
employee is entitled to (i) his then applicable salary for the then-remaining
term of his agreement and (ii) health insurance benefits as maintained by us for
the benefit of our senior executive employees. The term "involuntarily
terminated" refers to the termination of employment of the employee without his
express written consent, other than retirement. In addition, a material
diminution of or interference with the employee's duties, responsibilities and
benefits in his current officer position shall be deemed and shall constitute an
involuntary termination of employment to the same extent as express notice of
such involuntary termination. Any of the following actions would constitute such
diminution or interference unless consented to in writing by the employee:
(a) a change in the principal workplace of the employee to a
location outside of a 30 mile radius from our headquarters
office as of the date of the agreement;
(b) a material demotion of the employee, a material reduction in
the number or seniority of other personnel reporting to the
employee, or a material reduction in the frequency with which,
or in the nature of the matters with respect to which, such
personnel are to report to the employee, other than as part of
a company-wide reduction in staff;
(c) a material adverse change in the salary, perquisites,
benefits, contingent benefits or vacation time which had
previously been provided to the employee, other than as part
of an overall program applied uniformly and with equitable
effect to all members of the senior management of First Niles
or Home Federal; and
(d) a material permanent increase in the required hours of work or
the workload of the employee.
The employment agreements are also terminable by the employees upon 90 days'
notice to Home Federal.
11
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF AUDITORS
The First Niles Board of Directors has renewed arrangement for Anness,
Gerlach & Williams to be its independent auditors for the year ending December
31, 2000, subject to the ratification of the appointment by shareholders. A
representative of Anness, Gerlach & Williams 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 SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ANNESS, GERLACH & WILLIAMS AS FIRST NILES'
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000.
CERTAIN TRANSACTIONS
Home Federal has followed a policy of granting loans to officers and
directors. Loans to directors and executive officers are made in the ordinary
course of business and on the same terms and conditions as those of comparable
transactions with the general public prevailing at the time, in accordance with
our underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features.
All loans made by Home Federal to its directors and executive officers
are subject to the Office of Thrift Supervision regulations restricting loan and
other transactions with affiliated persons of Home Federal. All loans to
directors and executive officers were performing in accordance with their terms
at December 31, 1999.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in First Niles' proxy materials
for next year's annual meeting of shareholders, any shareholder proposal must be
received at First Niles' executive office at 55 North Main Street, Niles, Ohio
44446 on or before November 15, 2000. To be considered for presentation at next
years annual meeting, although not included in the proxy statement, any
shareholder proposal must be received at our executive office on or before
February 16, 2001; provided, however, that in the event that the date of next
year's annual meeting is held before March 30, 2001 or after June 18, 2001, the
shareholder proposal must be received on or before the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which notice of the date of the annual meeting was mailed or public
announcement of the date of such meeting was made, whichever occurs first.
All shareholder proposals for inclusion in First Niles' proxy materials
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended, and, as with any shareholder
proposal (regardless of whether it is included in First Niles' proxy materials),
the Company's Certificate of Incorporation and Bylaws, and Delaware law.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
annual meeting other than the matters described above in this proxy statement.
However, if any other matters should properly come before the meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
12
[FRONT OF CARD]
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THE ATTACHED PROXY IN
THE ENCLOSED. PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
fold and detach here
- --------------------------------------------------------------------------------
REVOCABLE PROXY
FIRST NILES FINANCIAL, INC.
ANNUAL MEETING OF SHAREHOLDERS o APRIL 19, 2000
The undersigned hereby appoints the members of the Board of Directors of First
Niles Financial, Inc., and its survivors, with full power of substitution, and
authorizes them to represent and vote, as designated below and in accordance
with their judgment upon any other matters properly presented at the annual
meeting, all the shares of First Niles Financial, Inc. common stock held of
record by the undersigned at the close of business on February 25, 2000, at the
annual meeting of shareholders to be held on Wednesday, April 19, 2000, and at
any and all adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE PROPOSALS SET FORTH HEREIN. Should a director nominee be
unable to serve as a director, an event that we do not currently anticipate, the
persons named in this proxy reserve the right, in their discretion, to vote for
a substitute nominee designated by the Board of Directors.
The Board of Directors recommends a vote "FOR" the listed proposals.
WITH- FOR ALL
FOR HOLD EXCEPT
----- ----- -------
Proposal I: The election of WILLAM L. STEPHENS and GEORGE J. / / / / / /
SWIFT as directors of First Niles Financial, Inc., each
with a term of three years.
INSTRUCTIONS: TO VOTE FOR BOTH NOMINEES MARK THE BOX "FOR" WITH AN "X". TO
WITHHOLD YOUR VOTE FOR BOTH NOMINEES MARK THE BOX "WITHHOLD" WITH AND "X". TO
WITHHOLD YOUR VOTE FOR AN INDIVIDUAL NOMINEE MARK THE BOX "FOR ALL EXCEPT" WITH
AN "X" AND WRITE THE NAME OF THE NOMINEE ON THE FOLLOWING LINE FOR WHOM
YOU WISH TO WITHHOLD YOUR VOTE.
FOR AGAINST ABSTAIN
Proposal II: Ratification of Anness, Gerlach & Williams as / / / / / /
independent auditors for the Company for the year ending
December 31, 2000.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
[BACK OF CARD]
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THE ATTACHED PROXY IN
THE ENCLOSED. PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
fold and detach here
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy may be revoked at any time before it is voted by
delivering to the Secretary of First Niles Financial, Inc. on or before the
taking of the vote at the annual meeting, a written notice of revocation bearing
a later date than this proxy or a later dated proxy relating to the same shares
of First Niles Financial, Inc. common stock, or by attending the annual meeting
and voting in person. Attendance at the annual meeting will not in itself
constitute the revocation of a 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 First Niles Financial,
Inc. prior to the execution of this proxy, of the Notice of Annual Meeting
scheduled to be held on April 19, 2000, an Annual Report to Shareholders for the
year ended December 31, 1999, and a proxy statement relating to the business to
be addressed at the meeting.
Dated: ________________________
PRINTED NAME OF SHAREHOLDER
APPEARS HERE _______________________________________
SIGNATURE OF SHAREHOLDER
_______________________________________
SIGNATURE OF SHAREHOLDER
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.