SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of
the Commission Only
X Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ESB Financial Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------
(2) Aggregate number of securities to which transaction applies:
-------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (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:
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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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[ESB Financial Corporation Letterhead]
March 15, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ESB Financial Corporation. The meeting will be held at the Connoquenessing
Country Club located at RD #2, Route 65, Ellwood City, Pennsylvania, on
Wednesday, April 17, 2002, at 4:00 p.m., Eastern Time. The matters to be
considered by stockholders at the Annual Meeting are described in detail in the
accompanying materials.
The Board of Directors of ESB Financial Corporation has determined that
the matters to be considered at the Annual Meeting are in the best interests of
the Company and its shareholders. For the reasons set forth in the Proxy
Statement, the Board unanimously recommends that you vote "FOR" each matter to
be considered.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. Let me urge you to mark, sign and date your proxy card today
and return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in ESB Financial Corporation is
appreciated.
Sincerely,
/s/ Charlotte A. Zuschlag
Charlotte A. Zuschlag
President and Chief Executive Officer
ESB FINANCIAL CORPORATION
600 LAWRENCE AVENUE
ELLWOOD CITY, PENNSYLVANIA 16117
(724) 758-5584
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 2002
----------------
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of ESB
Financial Corporation (the "Company") will be held at the Connoquenessing
Country Club located at RD #2, Route 65, Ellwood City, Pennsylvania, on
Wednesday, April 17, 2002, at 4:00 p.m., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect three directors for a three-year term and until their
successors are elected and qualified;
(2) To amend the Company's Articles of Incorporation to increase
the number of authorized shares of common stock of the Company
from 10,000,000 to 30,000,000;
(3) To ratify the appointment of Ernst & Young LLP as the
Company's independent public accountants for the year ending
December 31, 2002; and
(4) To transact such other business as may properly come before
the meeting or any adjournment thereof. Except with respect to
procedural matters incident to the conduct of the Annual
Meeting, management is not aware of any other matters which
could come before the Annual Meeting.
The Board of Directors has fixed March 6, 2002 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting or at any
such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Frank D. Martz
Frank D. Martz
Group Senior Vice President of Operations and
Secretary
March 15, 2002
Ellwood City, Pennsylvania
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
ESB FINANCIAL CORPORATION
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
APRIL 17, 2002
GENERAL
This Proxy Statement is being furnished to the holders of common stock,
$0.01 par value per share ("Common Stock"), of ESB Financial Corporation (the
"Company"), the savings and loan holding company of ESB Bank, F.S.B. (including
all predecessors thereto, "ESB Bank" or the "Bank"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at its
Annual Meeting of Stockholders ("Annual Meeting") to be held at the
Connoquenessing Country Club located at RD #2, Route 65, Ellwood City,
Pennsylvania, on Wednesday, April 17, 2002, at 4:00 p.m., Eastern Time, and at
any adjournment thereof, for the purposes set forth in the Notice of Annual
Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about March 15, 2002.
VOTING RIGHTS
Only stockholders of record at the close of business on March 6, 2002
("Voting Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At such date, there were 7,313,210 shares of Common Stock issued and
outstanding and the Company had no other class of equity securities outstanding.
Each share of Common Stock is entitled to one vote at the Annual
Meeting on all matters properly presented at the Annual Meeting. The presence in
person or by proxy of at least a majority of the issued and outstanding shares
of Common Stock entitled to vote is necessary to constitute a quorum at the
Annual Meeting. The persons receiving the greatest number of votes of the Common
Stock shall be elected as directors of the Company. The affirmative vote of the
holders of a majority of all outstanding shares of Common Stock entitled to vote
at the Annual Meeting is required for approval of the proposal to amend the
Company's Amended and Restated Articles of Incorporation (the "Articles of
Incorporation") to increase the number of authorized shares of Common Stock from
10,000,000 to 30,000,000. The affirmative vote of a majority of the total votes
cast at the Annual Meeting is required for approval of the proposal to ratify
the appointment of the Company's independent auditors.
Abstentions will be counted for purposes of determining the presence of
a quorum at the Annual Meeting. Because of the required votes, abstentions will
have no effect on the voting for the election of directors or the proposal to
ratify the appointment of the Company's independent auditors. Because the
proposal to amend the Articles of Incorporation requires the approval of the
holders of a majority of all outstanding shares of Common Stock, an abstention
will have the same effect as a vote against such proposal. Under rules
applicable to broker-dealers, all of the proposals for consideration at the
Annual Meeting are considered "discretionary" items upon which brokerage firms
may vote in their discretion on behalf of their client if such clients have not
furnished voting instructions. Thus, there are no proposals to be considered at
the Annual Meeting which are considered "non-discretionary" and for which there
will be "broker non-votes."
PROXIES
Shares of Common Stock represented by properly executed proxies, if
such proxies are received in time and not revoked, will be voted in accordance
with the instructions indicated on the proxies. If no contrary instructions are
given, each proxy received will be voted (i) FOR the nominees for director
described herein; (ii) FOR approval of the proposal to amend the Company's
Articles of Incorporation to increase the number of authorized shares of Common
Stock; (iii) FOR ratification of Ernst & Young LLP as the Company's independent
public accountants for the year
ending December 31, 2002; and (iv) upon the transaction of such other business
as may properly come before the meeting, in accordance with the best judgment of
the persons appointed as proxies. Any stockholder giving a proxy has the power
to revoke it at any time before it is exercised by (i) filing with the Secretary
of the Company written notice thereof (Frank D. Martz, Group Senior Vice
President of Operations and Secretary, ESB Financial Corporation, 600 Lawrence
Avenue, Ellwood City, Pennsylvania 16117); (ii) submitting a duly-executed proxy
bearing a later date; or (iii) appearing at the Annual Meeting and giving the
Secretary notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
BENEFICIAL OWNERSHIP
The following table sets forth information as to the Common Stock
beneficially owned, as of March 6, 2002, by (i) the only persons or entities,
including any "group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), who or which was known to
the Company to be the beneficial owner of more than 5% of the issued and
outstanding Common Stock, (ii) each director and director nominee of the
Company, (iii) certain named executive officers of the Company, and (iv) all
directors and executive officers of the Company as a group.
Amount and Nature of Beneficial Percent
Name and Address of Beneficial Owner Ownership as of March 6, 2002(1) of Common Stock
- ------------------------------------ -------------------------------- ---------------
ESB Financial Corporation 939,300(2) 12.8%
Employee Stock Ownership Plan Trust
600 Lawrence Avenue
Ellwood City, Pennsylvania 16117
Directors and nominees:
George William Blank, Jr. 49,326(3) *
Charles Delman 45,808(4) *
Lloyd L. Kildoo 185,501(5) 2.5
Mario J. Manna 47,780(6) *
William B. Salsgiver 231,077(7) 3.2
Herbert S. Skuba 105,624(8) 1.4
Edmund C. Smith 51,724(9) *
Edwin A. Thaner 51,763(10) *
Charlotte A. Zuschlag 291,548(11) 3.9
Named Executive Officers:
Thomas F. Angotti 64,082(12) *
Charles P. Evanoski 70,229(13) *
Robert C. Hilliard 81,578(14) *
Frank D. Martz 109,225(15) 1.5
Todd F. Palkovich 57,309(16) *
Directors and executive officers
of the Company as a group (14 persons) 1,442,574(17) 18.6%
- ------------------
* Amounts to less than 1.0% of the issued and outstanding Common Stock.
2
(1) Pursuant to rules promulgated by the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended
("Exchange Act"), a person or entity is considered to beneficially own
shares of Common Stock if the person or entity has or shares (i) voting
power, which includes the power to vote or to direct the voting of the
shares, or (ii) investment power, which includes the power to dispose
or direct the disposition of the shares. Unless otherwise indicated, a
person has sole voting power and sole investment power with respect to
the indicated shares. Under applicable regulations, a person is deemed
to have beneficial ownership of any shares of Common Stock which may be
acquired within 60 days of the Voting Record Date pursuant to the
exercise of outstanding stock options. Shares of Common Stock which are
subject to stock options are deemed to be outstanding for the purpose
of computing the percentage of outstanding Common Stock owned by such
person or group but not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other person or group.
(2) The ESB Financial Corporation Employee Stock Ownership Plan Trust
("Trust") was established pursuant to the ESB Financial Corporation
Employee Stock Ownership Plan ("ESOP") by an agreement between the
Company and William B. Salsgiver, George William Blank, Jr., Herbert S.
Skuba and Edmund C. Smith who act as trustees of the ESOP ("Trustees").
As of the Voting Record Date, 302,984 shares held in the Trust were
unallocated, and 636,316 shares held in the Trust had been allocated to
the accounts of participating employees. Under the terms of the ESOP,
the Trustees will generally vote all allocated shares held in the ESOP
in accordance with the instructions of the participating employees, and
allocated shares for which employees do not give instructions will
generally be voted in the same ratio on any matter as to those shares
for which instructions are given. Unallocated shares held in the ESOP
will be voted by the ESOP Trustees in accordance with their fiduciary
duties as trustees.
(3) Includes 8,920 shares owned jointly with Mr. Blank's wife, with whom
voting and dispositive power is shared, 9,720 shares held in Mr.
Blank's IRA, 4,800 shares held in Mr. Blank's Keogh Account and 12,768
shares which may be acquired by Mr. Blank upon the exercise of stock
options.
(4) Includes 19,032 shares owned by Mr. Delman's wife, 1,132 shares held in
Mr. Delman's IRA and 25,644 shares which may be acquired by Mr. Delman
upon the exercise of stock options.
(5) Includes 34,617 shares held by Mr. Kildoo's wife, 87,103 shares owned
jointly with Mr. Kildoo's wife, with whom voting and dispositive power
is shared and 20,593 shares which may be acquired by Mr. Kildoo upon
the exercise of stock options.
(6) Includes 11,268 shares held by Mr. Manna's wife, 4,987 shares held in
Mr. Manna's IRA, 3,402 shares held in Mr. Manna's wife's IRA and 13,057
shares which may be acquired by Mr. Manna upon the exercise of stock
options.
(7) Includes 152,304 shares owned jointly with Mr. Salsgiver's wife, with
whom voting and dispositive power is shared, 26,182 shares which may be
acquired by Mr. Salsgiver upon the exercise of stock options and 12,828
shares held in trust for which he is trustee.
(8) Includes 26,512 shares held by Mr. Skuba's wife, 37,924 shares owned
jointly with Mr. Skuba's wife, with whom voting and dispositive power
is shared, 2,866 shares held in Mr. Skuba's IRA and 20,350 shares which
may be acquired by Mr. Skuba upon the exercise of stock options. Does
not include 56,564 shares owned by the Ellwood City Hospital, of which
Mr. Skuba serves as President and Chief Executive Officer and as to
which beneficial ownership is disclaimed.
(9) Includes 26,182 shares which may be acquired by Mr. Smith upon the
exercise of stock options.
(10) Includes 11,027 shares owned jointly with Mr. Thaner's wife, with whom
voting and dispositive power is shared, 681 shares held in Mr. Thaner's
IRA, 313 shares held in Mr. Thaner's wife's IRA, 178 shares held in Mr.
Thaner's wife's profit sharing plan, and 38,698 shares which may be
acquired by Mr. Thaner upon the exercise of stock options.
3
(11) Includes 1,564 shares held in trust for Ms. Zuschlag's niece and four
nephews, for which she is custodian, 287 shares held in trust for Ms.
Zuschlag's two godsons, for which she is custodian, 5,084 shares held
in Ms. Zuschlag's IRA, 100,671 shares which may be acquired by Ms.
Zuschlag upon the exercise of stock options, 29,306 shares held by the
ESOP for the account of Ms. Zuschlag, 6,400 shares held in a Management
Recognition Plan ("MRP") which may be voted by Ms. Zuschlag pending
vesting and distribution, and 1,443 shares held by the Company's
Retirement Savings and Profit Sharing Plan ("Profit Sharing Plan")
account for Ms. Zuschlag. Does not include 11,449 shares held by a
trust established by the Company to fund certain benefits to be paid to
Ms. Zuschlag pursuant to an Excess Benefit Plan. Ms. Zuschlag does not
possess voting or investment power with respect to such shares. See
"Executive Compensation - Excess Benefit Plan."
(12) Includes 1,125 shares owned jointly with Mr. Angotti's wife, with whom
voting and dispositive power is shared, 3,304 shares held by Mr.
Angotti's wife, 40,820 shares which may be acquired by Mr. Angotti upon
the exercise of stock options, 7,251 shares held by the ESOP for the
account of Mr. Angotti, 800 shares held in a MRP which may be voted by
Mr. Angotti pending vesting and distribution, and 5,269 shares held by
the Profit Sharing Plan account for Mr. Angotti.
(13) Includes 33,391 shares which may be acquired by Mr. Evanoski upon the
exercise of stock options, 13,561 shares held by the ESOP for the
account of Mr. Evanoski, 800 shares held in a MRP which may be voted by
Mr. Evanoski pending vesting and distribution, and 1,084 shares held by
the Profit Sharing Plan account for Mr. Evanoski.
(14) Includes 10,131 shares held by Mr. Hilliard's wife, 1,876 shares held
in trust for Mr. Hilliard's son for which Mr. Hilliard's wife is
custodian, 26,365 shares which may be acquired by Mr. Hilliard upon the
exercise of stock options, 31,069 shares held by the ESOP for the
account of Mr. Hilliard, 800 shares held in a MRP which may be voted by
Mr. Hilliard pending vesting and distribution, and 996 shares held by
the Profit Sharing Plan account for Mr. Hilliard.
(15) Includes 49,864 shares owned jointly with Mr. Martz's wife, with whom
voting and dispositive power is shared, 29,557 shares which may be
acquired by Mr. Martz upon the exercise of stock options, 5,562 shares
which may be acquired by Mr. Martz 's wife upon the exercise of stock
options, 16,459 shares held by the ESOP for the account of Mr. Martz,
5,583 shares held by the ESOP for the account of Mr. Martz's wife, 800
shares held in a MRP which may be voted by Mr. Martz pending vesting
and distribution, 1,084 shares held by the Profit Sharing Plan account
for Mr. Martz and 316 shares held by the Profit Sharing Plan account
for Mr. Martz's wife.
(16) Includes 3,426 shares held in Mr. Palkovich's IRA, 33,391 shares which
may be acquired by Mr. Palkovich upon the exercise of stock options,
15,925 shares held by the ESOP for the account of Mr. Palkovich, 800
shares held in a MRP which may be voted by Mr. Palkovich pending
vesting and distribution, and 1,084 shares held by the Profit Sharing
Plan account for Mr. Palkovich.
(17) Includes 453,231 shares which may be acquired by all directors and
officers of the Company as a group upon the exercise of stock options.
Also includes 119,154, 11,276 and 10,400 shares which are held by the
ESOP, the Profit Sharing Plan and the MRP, respectively, which have
been allocated to the accounts of participating officers and,
consequently, will be voted at the Annual Meeting by direction of such
participating officers. Does not include 11,449 shares held by a trust
established by the Company to fund certain benefits to be paid to the
President and Chief Executive Officer of the Company. See "Executive
Compensation - Excess Benefit Plan."
4
ELECTION OF DIRECTORS
The Articles of Incorporation and Bylaws of the Company provide that
the Board of Directors shall be divided into three classes as nearly equal in
number as possible, and that the members of each class shall be elected for
terms of three years and until their successors are elected and qualified, with
one of the three classes of directors to be elected each year. The number of
directors currently authorized by the Company's Bylaws is nine.
At the Annual Meeting, stockholders of the Company will be asked to
elect three directors for a three-year term and until their successors are
elected and qualified. The three nominees for election as directors were
selected by the Nominating Committee of the Board of Directors. There are no
arrangements or understandings between the persons named and any other person
pursuant to which such person was selected as a nominee for election as a
director at the Annual Meeting, and no director or nominee for director is
related to any other director or executive officer of the Company by blood,
marriage or adoption.
If any person named as nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors of the Company. At this time, the Board of Directors knows of no
reason why any of the nominees may not be able to serve as a director if
elected.
Article 7.F of the Company's Articles of Incorporation governs
nominations for election to the Board of Directors and requires all nominations
for election to the Board of Directors, other than those made by or at the
direction of the Board, to be made pursuant to timely notice in writing to the
Secretary of the Company, as set forth in the Articles of Incorporation. To be
timely, with respect to an election to be held at an annual meeting of
stockholders, a stockholders' notice must be delivered to, or mailed and
received at, the principal executive offices of the Company, not later than 60
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders. Each written notice of a stockholder nomination must set forth
certain information specified in the Articles of Incorporation. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the procedures set forth in the Articles of
Incorporation.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following tables present information concerning each nominee for
director and each director whose term continues and reflects his/her tenure as a
director of the Company and his/her principal occupation during the past five
years.
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM EXPIRING IN 2005
Position with the Company and Director
Name Age Principal Occupation During the Past Five Years Since(1)
- -------------------------- --- -------------------------------------------------------- --------
Herbert S. Skuba 63 Vice Chairman of the Board of the Company and ESB Bank; 1988
Director, President and Chief Executive Officer of
Ellwood City Hospital, Ellwood City, Pennsylvania.
Charlotte A. Zuschlag 50 Director; President and Chief Executive Officer of the 1988
Company since February 1991 and of ESB Bank since
June 1989.
William B. Salsgiver 68 Chairman of the Board of the Company and ESB Bank; a 1987
principal of the property development and residential
construction firm, Perry Homes, Zelienople, Pennsylvania.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE
ABOVE NOMINEES FOR DIRECTOR.
5
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
DIRECTORS WITH TERMS EXPIRING IN 2003
Position with the Company and Director
Name Age Principal Occupation During the Past Five Years Since(1)
- ------------------- --- ------------------------------------------------------- --------
Charles Delman 76 Director; retired; former Chairman, President and 1994
Chief Executive Officer of ESB Bancorp, Inc. from June
1989 to March 1994 and President of Economy Savings
Bank, PaSA ("Economy") from 1971 to December 1992.
Chairman of Economy from January 1993 to March 1994.
Edmund C. Smith 81 Director; retired; former Works Manager, Armco Steel, 1994
Ambridge, Pennsylvania.
Edwin A. Thaner 53 Director; Proprietor and principal engineer with E.A. 1997
Thaner & Associates, Wexford, Pennsylvania, a civil
engineering firm.
DIRECTORS WITH TERMS EXPIRING IN 2004
Position with the Company and Director
Name Age Principal Occupation During the Past Five Years Since(1)
- --------------------------- --- ------------------------------------------------------ --------
George William Blank, Jr. 78 Director; President of George W. Blank Supply Co., 1974
Inc., Ellwood City, Pennsylvania, a concrete products
manufacturer and building supply distributor.
Lloyd L. Kildoo 62 Director; Owner and Funeral Director of Glenn-Kildoo 1986
Funeral Homes of Zelienople and Cranberry Township,
Pennsylvania.
Mario J. Manna 66 Retired tax collector, Borough of Coraopolis, 2001
Pennsylvania
- -------------
(1) Includes service with ESB Bank prior to the Bank's conversion to the
holding company form.
6
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth certain information with respect to the
executive officers of the Company who are not also directors of the Company. All
executive officers of the Company are elected annually by the Board of Directors
and shall serve at the discretion of the Board of Directors.
<Table>
<Caption>
Position with the Company and
Name Age Principal Occupation During the Past Five Years
- ---------------------- --- -------------------------------------------------------
Frank D. Martz 46 Group Senior Vice President of Operations of the
Company since January 2000 and Secretary of the
Company since February 1991; Group Senior Vice
President of Operations of ESB Bank since January 2000
and Secretary of ESB Bank since November 1989; Senior
Vice President of Operations of the Company and ESB
Bank from April 1993 through December 1999.
Charles P. Evanoski 43 Group Senior Vice President of the Company and ESB
Bank since January 2000 and Chief Financial Officer of
the Company and ESB Bank since April 1993; Senior Vice
President of the Company and ESB Bank from April 1993
through December 1999.
Todd F. Palkovich 47 Group Senior Vice President of Lending of the Company
and ESB Bank since January 2000; Senior Vice President
of Lending of the Company and ESB Bank from April 1993
through December 1999.
Robert C. Hilliard 52 Group Senior Vice President of Internal Audit,
Compliance and Loan Review of the Company and ESB Bank
since January 2000; Senior Vice President of Internal
Audit, Compliance and Loan Review of the Company and
ESB Bank from March 1995 through December 1999. Mr.
Hilliard is a certified public accountant.
Thomas F. Angotti 54 Group Senior Vice President of Administration of the
Company since February 2000; President and Chief
Executive Officer of SHS Bancorp, Inc. from September
1997 through February 2000; President and Chief
Executive Officer of Spring Hill Savings Bank from
April 1997 through May 2000; President of Spring Hill
Savings Bank from September 1989 through April 1997.
7
DIRECTORS' COMPENSATION
As of December 31, 2001, except as described below, all non-employee
directors of the Company receive $794 per month (except for Mr. Skuba who
receives $1,032 per month as Vice Chairman of the Company's Board of Directors)
and are not compensated for attendance at committee meetings. Mr. Salsgiver
receives $1,270 per month as Chairman of the Company's Board of Directors.
Full-time employee directors of the Company do not receive any fees for Board or
committee meetings. During 2001, total compensation paid to directors of the
Company amounted to $81,616 in the aggregate.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Regular meetings of the Board of Directors of the Company are held on a
monthly basis and special meetings of the Board of Directors of the Company are
held from time-to-time as needed.
There were 13 meetings of the Board of Directors of the Company held
during 2001. No director attended fewer than 75% of both the aggregate total
number of meetings of the Board of Directors held during 2001 and the total
number of meetings held by all committees of the Board on which the director
served during such year.
The Board of Directors of the Company has established various standing
committees of the Board, including Executive, Compensation and Audit Committees.
The entire Board of Directors of the Company acts as a Nominating Committee. The
Company and its subsidiaries have other committees comprised of officers and
directors of the Company and such subsidiaries which meet for specific purposes.
The Executive Committee of the Company is authorized to exercise the
powers of the Board of Directors between regular meetings of the Board.
Currently, Messrs. Skuba, Salsgiver and Delman and Ms. Zuschlag (Chairperson)
serve as members of this Committee. During 2001, the Executive Committee met
four times.
The Compensation Committee of the Company makes recommendations
regarding officer salaries to the Board of Directors. Currently, Messrs.
Salsgiver (Chairman), Kildoo and Smith serve as members of this Committee.
During 2001, the Compensation Committee met once.
The Audit Committee of the Company reviews the Company's records and
affairs to determine its financial condition, reviews the Company's systems of
internal control with management and the independent auditors, and monitors the
Company's adherence in accounting and financial reporting to generally accepted
accounting principles. Currently, Messrs. Smith (Chairman), Delman, Kildoo and
Manna serve as members of this Committee. The Audit Committee met four times
during 2001. The members are independent as defined in Rule 4200(a)(14) of the
listing standards of the Nasdaq Stock Market.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the audited financial
statements with management. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 "Communication with Audit Committees," as may be
modified or supplemented. The Audit Committee has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and has discussed with the independent accountant, the independent accountant's
independence. Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001 for filing with the SEC.
Edmund C. Smith, Chairman
Charles Delman
Lloyd L. Kildoo
Mario J. Manna
8
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company or its
subsidiaries for services rendered in all capacities during the last three
fiscal years to the President and Chief Executive Officer and the five other
highest compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
===================================================================================================================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------- ------------------------------
OTHER AWARDS ALL OTHER
NAME AND ANNUAL COMPENSATION(4)
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
(1)
------------------------------
STOCK SECURITIES
GRANTS (2) UNDERLYING
OPTIONS(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Charlotte A. Zuschlag 2001 $299,231 $ 90,000 $ -- $90,160 15,000 $27,830
President and Chief 2000 285,090 140,200 -- -- 16,931 28,135
Executive Officer 1999 271,062 55,000 -- -- 17,852 28,718
- -----------------------------------------------------------------------------------------------------------------------------------
Charles P. Evanoski 2001 $113,908 $ 22,680 $ -- $11,270 3,300 $19,746
Group Senior Vice President 2000 109,339 26,800 -- -- 9,600 19,034
and Chief Financial Officer 1999 103,092 15,000 -- -- 5,940 19,029
- -----------------------------------------------------------------------------------------------------------------------------------
Frank D. Martz 2001 $113,908 $ 22,680 $ -- $11,270 3,300 $19,746
Group Senior Vice President 2000 109,339 26,800 -- -- 9,600 19,034
of Operations and Secretary 1999 103,092 15,000 -- -- 5,940 19,029
- -----------------------------------------------------------------------------------------------------------------------------------
Todd F. Palkovich 2001 $113,908 $ 22,680 $ -- $11,270 3,300 $19,746
Group Senior Vice President 2000 109,339 26,800 -- -- 9,600 19,034
of Lending 1999 103,092 15,000 -- -- 5,940 19,029
- -----------------------------------------------------------------------------------------------------------------------------------
Robert C. Hilliard 2001 $104,462 $ 20,800 $ -- $11,270 3,300 $18,118
Group Senior Vice President 2000 100,308 25,000 -- -- 9,600 17,476
of Internal Audit, 1999 94,609 14,000 -- -- 5,940 17,471
Compliance and Loan Review
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas F. Angotti(5) 2001 $104,462 $ 20,800 $ -- $11,270 3,300 $18,118
Group Senior Vice President 2000 88,769 25,000 -- -- 9,600 16,921
of Administration
===================================================================================================================================
- -------------
(1) Does not include amounts attributable to miscellaneous benefits received
by the named executive officer, including the payment of club membership
dues and the use and maintenance of an automobile. In the opinion of
management of the Company, the costs to the Company of providing such
benefits to the named executive officer during the year ended December
31, 2001 did not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for such individual.
(2) Represents the grant of 8,000, 1,000, 1,000, 1,000, 1,000 and 1,000
shares of restricted Common Stock to Ms. Zuschlag and Messrs. Evanoski,
Martz, Palkovich, Hilliard and Angotti, respectively, in 2001 pursuant to
the MRP, which were deemed to have had the indicated value at the date of
grant, and which had a fair market value at December 31, 2001 of $82,800,
$10,350, $10,350, $10,350, $10,350 and $10,350, respectively. The awards
vest over four years; 20% immediately and 20% each year from the date of
grant. Dividends paid on the restricted Common Stock are paid to the
recipient.
9
(3) Represents grants of stock options under the Company's stock option
plans. The awards have been adjusted for subsequent stock splits and any
stock dividends.
(4) During the year ended December 31, 2001, consists of amounts allocated,
accrued or paid by the Company on behalf of Ms. Zuschlag and Messrs.
Evanoski, Martz, Palkovich, Hilliard and Angotti pursuant to the Profit
Sharing Plan of $5,950, $4,780, $4,780, $4,780, $4,384 and $4,384,
respectively, and estimated allocations under the ESOP of $21,880,
$14,966, $14,966, $14,966, $13,734 and $13,734, respectively.
(5) Mr. Angotti became an executive officer of the Company on February 10,
2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of the Company's Common Stock to
file reports of ownership and changes in ownership with the SEC and the National
Association of Securities Dealers, Inc. Officers, directors and 10% stockholders
are required by regulation to furnish the Company with copies of all Section
16(a) forms they file. The Company knows of no person, other than the Company's
ESOP, who owns 10% or more of the Company's Common Stock.
Based solely on review of the copies of such forms furnished to the
Company, the Company believes that during 2001, all Section 16(a) filing
requirements applicable to its officers and directors were complied with.
STOCK OPTIONS
The following table sets forth certain information concerning
individual grants of stock options pursuant to the Company's stock option plans
to the named executive officers during the year ended December 31, 2001.
====================================================================================================================
Potential Realizable Value at
Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(4)
- --------------------------------------------------------------------------------------------------------------------
% of Total
Options
Options Granted to Exercise Expiration
Name Granted(1) Employees(2) Price(3) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------
Charlotte A. Zuschlag 15,000 25.2% $11.27 11/19/11 $104,700 $264,750
- --------------------------------------------------------------------------------------------------------------------
Charles P. Evanoski 3,300 5.5 11.27 11/19/11 23,034 58,245
- --------------------------------------------------------------------------------------------------------------------
Frank D. Martz 3,300 5.5 11.27 11/19/11 23,034 58,245
- --------------------------------------------------------------------------------------------------------------------
Todd F. Palkovich 3,300 5.5 11.27 11/19/11 23,034 58,245
- --------------------------------------------------------------------------------------------------------------------
Robert C. Hilliard 3,300 5.5 11.27 11/19/11 23,034 58,245
- --------------------------------------------------------------------------------------------------------------------
Thomas F. Angotti 3,300 5.5 11.27 11/19/11 23,034 58,245
====================================================================================================================
.........
(1) The options vested immediately and are exercisable on the date of
grant.
(2) Percentage of options to purchase Common Stock granted to all employees
during 2001.
(3) The exercise price was based on the market price of the Common Stock on
the date of grant.
(4) Assumes compounded rates of return for the remaining life of the
options and future stock prices of $18.25 and $28.92 at compounded
rates of return of 5% and 10%, respectively.
10
The following table sets forth certain information concerning exercises
of stock options by the named executive officers during the year ended December
31, 2001 and options held at December 31, 2001.
=========================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------------
Number of Value of
Shares Unexercised Unexercised
Acquired on Options at Year End(1) Options at
Exercise Value Year End(2)
Name Realized
- -------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
Charlotte A. Zuschlag 4,966 $31,882 100,671 0 $ 119,954 $ 0
- -------------------------------------------------------------------------------------------------------------------------
Charles P. Evanoski 1,484 9,230 34,391 6,400 47,933 10,906
- -------------------------------------------------------------------------------------------------------------------------
Frank D. Martz 3,832 15,443 29,557 6,400 30,178 10,906
- -------------------------------------------------------------------------------------------------------------------------
Todd F. Palkovich 0 0 33,391 6,400 42,363 10,906
- -------------------------------------------------------------------------------------------------------------------------
Robert C. Hilliard 0 0 26,365 6,400 23,247 10,906
- -------------------------------------------------------------------------------------------------------------------------
Thomas F. Angotti 0 0 40,820 6,400 160,579 10,906
=========================================================================================================================
(1) As adjusted for subsequent stock splits and stock dividends.
(2) Based on a per share market price of $10.35 at December 31, 2001.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
ESB Bank has entered into an employment agreement with Ms. Zuschlag
pursuant to which ESB Bank agreed to employ her as President and Chief Executive
Officer for a term of three years with a current base salary of $311,600. Such
salary may be increased in the discretion of the Board of Directors of ESB Bank
but may not be decreased during the term of the agreement without the prior
written consent of Ms. Zuschlag. On an annual basis, the Board of Directors of
ESB Bank considers whether to renew the employment agreement for an additional
year. The employment agreement is terminable with or without cause by ESB Bank.
The employment agreement provides that in the event of a wrongful termination of
employment (including a voluntary termination by Ms. Zuschlag as a result of ESB
Bank's material breach of the agreement or for "good reason" following a change
in control of the Company, including a change in her position, salary or duties
without her consent), Ms. Zuschlag would be entitled to (1) an amount of cash
severance which is equal to three times her average annual compensation over the
last five years, and (2) continued participation in certain employee benefit
plans of ESB Bank for the remaining term of the agreement or shorter period upon
her full-time employment by another employer. The employment agreement with ESB
Bank provides that in the event any of the payments to be made thereunder or
otherwise upon termination of employment are deemed to constitute "parachute
payments" within the meaning of Section 280G of the Code, then such payments and
benefits received thereunder shall be reduced, in the manner determined by Ms.
Zuschlag, by the minimum amount necessary to result in no portion of the
payments and benefits being non-deductible by ESB Bank for federal income tax
purposes. Parachute payments generally are payments in excess of three times the
base amount, which is defined to mean the recipient's average annual
compensation from the employer includable in the recipient's gross income during
the most recent five taxable years ending before the date on which a change in
control of the employer occurred. Recipients of parachute payments are subject
to a 20% excise tax on the amount by which such payments exceed the base amount,
in addition to regular income taxes, and payments in excess of the base amount
are not deductible by the employer as compensation expense for federal income
tax purposes.
The Company has also entered into an employment agreement with Ms.
Zuschlag to serve on terms substantially similar to the agreement entered into
with ESB Bank, except as provided below. Ms. Zuschlag's compensation, benefits
and expenses are paid by the Company and ESB Bank in the same proportion as the
time and services actually expended by her on behalf of each company. However,
the agreement with the Company provides that severance payments payable to Ms.
Zuschlag by the Company shall (1) include the amount by which the severance
benefits payable by ESB Bank are reduced by Section 280G of the Code, and (2)
not be subject to reduction in the event
11
of a change in control as are the amounts payable by ESB Bank. As a result, the
severance benefits payable by the Company may constitute "parachute payments"
under Section 280G of the Code. In addition, the agreement with the Company
provides that the Company shall reimburse Ms. Zuschlag for any resulting excise
taxes payable by her, plus such additional amount as may be necessary to
compensate her for the payment of state and federal income, excise and other
employment-related taxes on the additional payments.
The Company and ESB Bank entered into change of control agreements with
Messrs. Evanoski, Martz, Palkovich, Hilliard and Angotti in order to assist them
in maintaining a stable and competent management base. The agreements provide
for a three-year term, and subject to satisfactory performance reviews, among
other things, shall extend on each anniversary date for an additional year so
that the remaining term will be three years, unless either the Boards of
Directors of the employers or the executive provides contrary written notice to
the other not less than 30 days in advance of such anniversary date. The
agreements are automatically extended for an additional one year upon a Change
in Control, as defined. The agreements provide for payments in the event that
certain adverse actions are taken with respect to the executive's employment
subsequent to a Change in Control in an amount equal to 1.5 times the respective
executive's annual compensation, as defined.
EXCESS BENEFIT PLAN
The Company has adopted an Excess Benefit Plan ("EBP") for the purpose
of permitting Ms. Zuschlag, and any other employees of the Company who may be
designated pursuant to the EBP, to receive certain benefits that Ms. Zuschlag
and any other employees of the Company otherwise would be eligible to receive
under the Company's Retirement Plan and ESOP but for the limitations set forth
in Sections 401(a)(17), 402(g) and 415 of the Internal Revenue Code of 1986, as
amended (the "Code"). Pursuant to the EBP, during any plan year the Company
shall make matching contributions on behalf of the participant in an amount
equal to the amount of matching contributions that would have been made by the
Company on behalf of the participant but for limitations in the Code, less the
actual amount of matching contributions actually made by the Company on behalf
of the participant. Finally, the EBP generally provides that during any plan
year a participant shall receive a supplemental ESOP allocation in an amount
equal to the amount which would have been allocated to the participant but for
limitations in the Code, less the amount actually allocated to the participant
pursuant to the ESOP. The supplemental benefits to be received by a participant
pursuant to the EBP shall be credited to an account maintained pursuant to the
EBP within 180 days after the end of each plan year. In connection with its
adoption of the EBP, the Company adopted a trust which currently holds 11,449
shares of Common Stock to fund its obligation to Ms. Zuschlag under the EBP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has adopted a Supplemental Executive Benefit Plan ("SERP")
in order to provide supplemental retirement and death benefits for certain key
employees of the Company. Under the SERP, participants shall receive an annual
retirement benefit following retirement at age 65 equal to 25% of the
participant's final average pay multiplied by a target retirement benefit
percentage. Final average pay is based upon the participant's last three year's
compensation and the target benefit percentage is equal to the fraction
resulting from the participant's years of credited service divided by 20.
Benefits under the plan are payable in ten equal annual payments and a lesser
benefit is payable upon early retirement at age 55 with at least ten years of
service. If a participant dies prior to retirement, the participant's estate
will receive a lump sum payment equal to the net present value of future benefit
payments under the plan. At December 31, 2001, Ms. Zuschlag and Messrs.
Evanoski, Martz, Palkovich, Hilliard and Angotti had 13, 18, 22, 10, 23 and 15
years of credited service under the SERP, respectively.
COMPENSATION COMMITTEE
Executive compensation is determined by the Compensation Committee of
the Board of Directors. The report of the Compensation Committee with respect to
compensation for the Chief Executive Officer and all other executive officers is
set forth below, as defined.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
12
The executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee"), which is composed of the
individuals listed below this report, none of whom is a full-time employee
director of the Company. The Committee makes recommendations regarding officer
salaries to the Board of Directors.
The Committee determines the level of salary increases, if any, to take
effect on December 1 after reviewing various published surveys of compensation
paid to executives performing similar duties for financial institutions and
their holding companies, with a particular focus on the level of compensation
paid by comparable institutions in ESB Bank's market. Also, it is the policy of
the Committee to determine the salary components of executive compensation upon
the basis of corporate performance. The performance factors which the Committee
considers are profitability, capital levels, and performance relative to such
industry standards as problem asset levels, loan production, regulatory
compliance, and asset-liability management. The Committee also considers whether
or not the overall value of the Company has improved from year to year.
The Company's executive compensation program are designed to:
1. Align the interests of executives with the interests of the
stockholders by providing performance based awards in cash and
stock; and
2. Allow the Company to compete for and retain executives
critical to the Company's success by providing an opportunity
for compensation that is comparable to the levels offered by
other companies in our market.
Stock options were granted to executive officers of the Company during
fiscal 2000. Ms. Zuschlag received 16,931 options and Messrs. Evanoski, Martz,
Palkovich, Hilliard and Angotti each received 9,600 options (adjusted for a
subsequent 20% stock split). Stock options and Management Recognition Plan
("MRP") stock awards were granted to executive officers of the Company during
fiscal 2001. Ms. Zuschlag received 15,000 options and Messrs. Evanoski, Martz,
Palkovich, Angotti and Hilliard each received 3,300 options. In addition in
2001, Ms. Zuschlag received an MRP grant of 8,000 shares and Messrs. Evanoski,
Martz, Palkovich, Angotti and Hilliard each received a grant of 1,000 shares.
Bonuses were paid to the executive officers of the Company during
fiscal 2000. Ms. Zuschlag was paid $140,200. Messrs. Evanoski, Martz, Palkovich,
Angotti and Hilliard were paid $26,800, $26,800, $26,800, $25,000 and $25,000,
respectively. Bonuses were paid to the executive officers of the Company during
fiscal 2001. Ms. Zuschlag was paid $90,000 and Messrs. Evanoski, Martz,
Palkovich, Angotti and Hilliard were paid $22,680, $22,680, $22,680, $20,800 and
$20,800, respectively.
Ms. Zuschlag's compensation increased from $285,090 for fiscal 2000 to
$299,231 for fiscal 2001. Messrs. Evanoski, Martz and Palkovich's compensation
increased from $109,339 for fiscal 2000 to $113,908 for fiscal 2001. Mr.
Hilliard's compensation increased from $100,308 for fiscal 2000 to $104,462 for
fiscal 2001. Mr. Angotti's compensation increased from $88,769 for fiscal 2000
to $104,462 for fiscal 2001. At the meeting of the Committee that determined
executive officers salaries to be effective December 1, 2001, the Committee
reviewed and considered various published compensation surveys, the executive
officers increased scope of responsibilities relating to ESB Financial
Corporation's continuing growth as well as the aforementioned factors, the
Committee recommended to the Board of Directors and increase in salary to a
level of $311,600 for Ms. Zuschlag, a level of $120,000 for Messrs. Evanoski,
Martz and Palkovich and a level of $110,000 for Messrs. Hilliard and Angotti.
The Compensation Committee
William B. Salsgiver (Chairman)
Lloyd L. Kildoo
Edmund C. Smith
13
PERFORMANCE GRAPH
The following two graphs compare the yearly cumulative total return on
the Common Stock over five-year and ten-year measurement periods with (i) the
yearly cumulative total return on the stocks included in the S&P 500 Total
Return Index and (ii) the yearly cumulative total return on the stocks included
in the SNL Securities All Banks and Thrifts Index. All of these cumulative
returns are computed assuming the reinvestment of dividends at the frequency
with which dividends were paid during the applicable year.
[Graph]
PERIOD ENDING
-------------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- -------------------------------------------------------------------------------------------------------------------
ESB Financial Corporation $100.00 $158.9 $150.01 $113.05 $106.76 $140.03
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
SNL All Bank and Thrift Index 100.00 153.51 162.95 155.89 199.32 191.10
14
[GRAPH]
PERIOD ENDING
-------------------------------------------------------------------------------------------------------
INDEX 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------------------------------------------------------------------------------------------------------------------------------
ESB Financial Corporation 100.00 181.00 181.35 158.12 198.77 214.02 340.09 321.06 241.94 228.49 299.70
S&P 500 100.00 107.62 118.47 120.03 165.13 202.89 270.59 347.84 421.04 382.69 337.23
SNL All Bank & Thrift Index 100.00 137.32 152.38 149.01 231.98 321.56 493.61 523.96 501.26 605.54 614.48
15
INDEBTEDNESS OF MANAGEMENT
In accordance with applicable federal laws and regulations, ESB Bank
offers mortgage loans to its directors, officers and full-time employees for the
financing of their primary residences as well as various consumer loans. These
loans are generally made on substantially the same terms as those prevailing at
the time for comparable transactions with non-affiliated persons. It is the
belief of management that these loans neither involve more than the normal risk
of collectibility nor present other unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any
credit extended by a savings institution to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any related
interest of the foregoing, must (i) be on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings association with non-affiliated parties;
(ii) be pursuant to underwriting standards that are no less stringent than those
applicable to comparable transactions with non-affiliated parties; (iii) not
involve more than the normal risk of repayment or present other unfavorable
features; and (iv) not exceed, in the aggregate, the institution's unimpaired
capital and surplus, as defined.
As of December 31, 2001, three of the directors of the Company had
aggregate loan balances in excess of $60,000, which amounted to $705,393 in the
aggregate. All such loans were made by ESB Bank in the ordinary course of
business and were not made with favorable terms nor did they involve more than
the normal risk of collectibility.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
At the Annual Meeting, stockholders will be asked to consider and
approve a proposal to amend the Company's Articles of Incorporation to increase
the number of shares of authorized Common Stock from 10,000,000 to 30,000,000.
Such amendment was unanimously approved by the Board of Directors of the
Company.
DISCUSSION OF THE PROPOSED AMENDMENT
The Company's Articles of Incorporation currently authorize 15,000,000
shares of capital stock, consisting of 10,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $.01 per share. The proposed
amendment to the Articles of Incorporation would increase the number of shares
of authorized capital stock by 20,000,000 to 35,000,000 shares. If the amendment
is authorized, paragraph A of Article 5 of the Company' s Articles of
Incorporation would be amended to read as follows:
"ARTICLE 5. CAPITAL STOCK. A. AUTHORIZED AMOUNT. The total number of
shares of capital stock which the Corporation has authority to issue is
35,000,000, of which 5,000,000 shall be serial preferred stock, $.01
par value per share (hereinafter "Preferred Stock"), and 30,000,000
shall be common stock, par value $.01 per share (hereinafter "Common
Stock"). Except to the extent required by governing law, rule or
regulation, the shares of capital stock may be issued from time to time
by the Board of Directors without further approval of stockholders. The
Corporation shall have the authority to purchase its capital stock out
of funds lawfully available therefor."
As of December 31, 2001, there were 7,320,388 shares of Common Stock
outstanding. In addition, an aggregate of 1,057,102 shares of Common Stock were
reserved for issuance pursuant to the Company's dividend reinvestment and
various stock-based compensation and employee benefit plans, leaving only
1,622,510 shares of Common Stock available for issuance.
The Board of Directors has determined that the number of shares of
authorized Common Stock should be increased to provide the Company with the
flexibility to conduct the Company's future operations, including the issuance,
distribution, exchange or reservation of shares of Common Stock for stock
dividends (the Company has declared a stock dividend in prior years, including
in each of the past two years), acquisitions, financing and employee
16
stock compensation plans. The Board of Directors currently has no specific plan
to issue additional Common Stock, except pursuant to the Company's employee
stock compensation plans.
Under certain circumstances, authorized but unissued shares of Common
Stock and Preferred Stock can provide the Board of Directors with a means of
discouraging an unsolicited change in control of the Company. Although the
proposed amendment may allow the Board of Directors to issue additional shares
of Common Stock in the event of an unsolicited attempt to acquire control of the
Company as a means of discouraging a hostile acquirer, the Board of Directors
has no present intention of using the existing or proposed authorized but
unissued Common Stock or the existing authorized but unissued Preferred Stock
for such purpose. The Board of Directors is not presently aware of any plans to
acquire control of the Company.
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership.
Stockholders who desire to maintain their interest may be able to do so through
normal market purchases, however.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF ADOPTION OF THE PROPOSAL TO
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
GENERAL
The Board of Directors of the Company has appointed Ernst & Young LLP,
as independent auditors for the Company for the year ending December 31, 2002,
and further directed that the selection of auditors be submitted for
ratification by the stockholders at the Annual Meeting. The Company has been
advised by Ernst & Young that neither the firm nor any of its associates has any
relationship with the Company or its subsidiaries other than the usual
relationship that exists between independent public accountants and clients.
Ernst & Young will have representatives at the Annual Meeting who will have an
opportunity to make a statement, if they so desire, and will be available to
respond to appropriate questions.
CHANGE IN AUDITORS
Prior to the year ended December 31, 2000, the Company's financial
statements were audited by KPMG LLP. The engagement of KPMG was terminated by
the Board of Directors and Ernst & Young was engaged in May 2000 and remains as
the independent auditors of the Company. In connection with their audit for the
years ended December 31, 1999 and 1998 and during subsequent interim periods
preceding the replacement of KPMG, there were no disagreements with KPMG on any
matter of accounting principles or practices, financial statement disclosures,
or auditing scope or procedure. KPMG's report on the financial statements for
1999 and 1998 did not contain an adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principles. During 1999 and 1998 and the subsequent interim periods preceding
KPMG's replacement, KPMG did not advise, and has not indicated to the Company
that it had reason to advise, the Company of any reportable event, as defined in
Item 304(a) of Regulation S-K of the Exchange Act. During 1999 and 1998 and the
subsequent interim periods preceding the selection of Ernst & Young, the Company
had not consulted Ernst & Young regarding the application of accounting
principles, either contemplated or proposed, the type of audit opinion that
might be rendered on the Company's financial statements or any other matters
that would be required to be reported herein.
AUDIT FEES
The aggregate amount of the fees billed by Ernst & Young for its audit
of the Company's annual financial statements for 2001 and its reviews of the
Company's unaudited interim financial statements included in reports filed by
the Company under the Exchange Act during the year was $106,050.
17
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
Ernst & Young did not provide any services to the Company for financial
information systems design and implementation during 2001.
ALL OTHER FEES
The aggregate amount of the fees billed by Ernst & Young for all other
services rendered by it to the Company during 2001 was $132,650. These services
consisted primarily of tax compliance and tax consulting services, which
accounted for fees of $87,675, as well as audit related services such as the
audit of the Company's benefit plans, the agreed upon procedures for reviewing
student loans performed under the Federal Family Educational Loan Program and
the issuance of consents in connection with various registration statements,
which accounted for fees of $44,975.
The Board of Directors and its Audit Committee considered the
compatibility of the non-audit services provided to the Company by Ernst & Young
in 2001 on the independence of Ernst & Young from the Company in evaluating
whether to appoint Ernst & Young to perform the audit of the Company's financial
statements for the year ending December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP, AS INDEPENDENT AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 2002.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than those matters described in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company has retained Morrow & Company, a professional proxy solicitation firm,
to assist in the solicitation of proxies. The fee arrangement with such firm is
$3,000 plus reimbursement for out-of-pocket expenses. The Company will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners of
the Common Stock. In addition to solicitations by mail, directors, officers and
employees of the Company may solicit proxies personally or by telephone without
additional compensation.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next Annual Meeting of
Stockholders of the Company, must be received at the principal executive offices
of the Company, 600 Lawrence Avenue, Ellwood City, Pennsylvania 16117,
Attention: Secretary, no later than November 15, 2002. If such proposal is in
compliance with all of the requirements of Rule 14a-8 promulgated under the
Exchange Act, it will be included in the Company's Proxy Statement and set forth
on the form of proxy issued for the next annual meeting of stockholders. It is
urged that any such proposals be sent by certified mail, return receipt
requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article 10.F of the Company's
Articles of Incorporation, which provides that to be properly brought before an
annual meeting, business must be (a) properly brought before the meeting by or
at the direction of the Board of Directors or (b) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the
18
Company, or not later than February 16, 2003 in connection with the next
annual meeting of stockholders of the Company. A stockholder's notice must set
forth, as to each matter the stockholder proposes to bring before an annual
meeting, (a) a brief description of the business desired to be brought before
the annual meeting and (b) certain other information set forth in the Articles
of Incorporation. No stockholder proposals have been received by the Company in
connection with the Annual Meeting.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 2001 accompanies this proxy statement.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH
THE SEC UNDER THE EXCHANGE ACT FOR THE YEAR ENDED DECEMBER 31, 2001. UPON
WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY SUCH STOCKHOLDER A COPY OF THE
EXHIBITS TO THE ANNUAL REPORT ON FORM 10-K. SUCH WRITTEN REQUESTS SHOULD BE
DIRECTED TO ESB FINANCIAL CORPORATION, 600 LAWRENCE AVENUE, ELLWOOD CITY,
PENNSYLVANIA 16117, ATTENTION: SECRETARY. THE ANNUAL REPORT ON FORM 10-K IS NOT
A PART OF THIS PROXY STATEMENT.
19
REVOCABLE PROXY
ESB FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ESB
FINANCIAL CORPORATION (THE "COMPANY") FOR USE ONLY AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON APRIL 17, 2002 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of the Company,
or any successors thereto, as proxies, with full powers of substitution, to vote
the shares of the undersigned at the Annual Meeting of Stockholders of the
Company to be held at the Connoquenessing Country Club located at RD #2, Route
65, Ellwood City, Pennsylvania, on Wednesday, April 17, 2002, at 4:00 p.m.,
Eastern Time, or at any adjournment thereof, with all the powers that the
undersigned would possess if personally present, as indicated on the reverse
side hereof.
1. Election of Directors
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary.) listed.
Nominees for three-year term:
HERBERT S. SKUBA, CHARLOTTE A. ZUSCHLAG AND WILLIAM B. SALSGIVER.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. Proposal to amend the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock from 10,000,000 to 30,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 2002.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, the election of any
person as a director if the nominee is unable to serve or for good cause will
not serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the meeting.
The Board of Directors recommends that you vote FOR the nominees for
director listed on the reverse side hereof and FOR the proposals to amend the
Company's Articles of Incorporation to increase the number of authorized shares
of Common Stock and to ratify the independent auditors for 2002 You are
encouraged to specify your choices by marking the appropriate boxes on the
reverse side; however, you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. This proxy may not be
voted for any person who is not a nominee of the Board of Directors of the
Company. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF THE COMPANY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SHARES WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR THE PROPOSAL TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND FOR THE PROPOSAL TO RATIFY THE INDEPENDENT AUDITORS FOR
2002, AND OTHERWISE AT THE DISCRETION OF THE PROXIES.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders of the Company called for April 17, 2002, a Proxy Statement for
the Annual Meeting and the 2001 Annual Report to Stockholders.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE.
Date: , 2002
-------------------------
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Signature
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Signature
PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR(S) ON THIS PROXY. ONLY ONE
SIGNATURE IS REQUIRED IN CASE OF A
JOINT ACCOUNT. WHEN SIGNING IN A
REPRESENTATIVE CAPACITY, PLEASE GIVE
TITLE.