UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS
PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
FIRST KEYSTONE CORPORATION
_____________________________________________________
(Exact name of registrant as specified in its Charter)
_____________________________________________________
(Name of Person(s) Filing Proxy Statement if other
than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applied:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rul 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FIRST KEYSTONE CORPORATION
_________________________________________________________________
111 West Front Street
Berwick, Pennsylvania 18603
March 24, 2010
Dear Fellow Shareholders of First Keystone Corporation:
It is my pleasure to invite you to attend the 2010 Annual
Meeting of Shareholders of First Keystone Corporation to be held
on Tuesday, May 4, 2010, at 10:00 a.m., Eastern Daylight Time.
The Annual Meeting this year will be held at the McBride Memorial
Library, Community Room, 500 Market Street, Berwick, Pennsylvania
18603.
The Notice of the Annual Meeting and the Proxy Statement on
the following pages address the formal business of the meeting.
The formal business schedule includes:
* The election of 4 Class B Directors; and
* The ratification of the selection of J. H. Williams &
Co., LLP, as the independent
auditors for the corporation for the fiscal year ending
December 31, 2010.
At the meeting, members of the corporation's management will
review the corporation's operations during the past year and will
be available to respond to questions.
We strongly encourage you to vote your shares, whether or
not you plan to attend the meeting. It is very important that
you sign, date and return your proxy form as soon as possible.
The execution and delivery of your proxy does not affect your
right to vote in person if you attend the meeting. You may
revoke your proxy any time prior to its exercise, and you may
attend the meeting and vote in person, even if you have
previously returned your proxy.
Thank you for your continued support. I look forward to
seeing you at the Annual Meeting if you are able to attend.
Sincerely,
/s/ J. Gerald Bazewicz
J. Gerald Bazewicz
President
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
FIRST KEYSTONE CORPORATION
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2010
_________________________________________
TO THE SHAREHOLDERS OF FIRST KEYSTONE CORPORATION:
Notice is hereby given that the Annual Meeting of
Shareholders of First Keystone Corporation will be held at 10:00
a.m., Eastern Daylight Time, on Tuesday, May 4, 2010, at the
McBride Memorial Library, Community Room, 500 Market Street,
Berwick, Pennsylvania 18603, for the following purposes:
1. To elect 4 Class B Directors to serve for a three
year term and until their successors are properly elected and
qualified;
2. To ratify the selection of J. H. Williams & Co., LLP
as the independent auditors for the corporation for the fiscal
year ending December 31, 2010; and
3. To transact any other business as may properly come
before the Annual Meeting and any adjournment or postponement of
the meeting.
In accordance with the bylaws of the corporation and action
of the Board of Directors, the corporation is giving notice of
the Annual Meeting only to those shareholders on the
corporation's records as of the close of business on March 9,
2010, and only those shareholders may vote at the Annual Meeting
and any adjournment or postponement of the Annual Meeting.
A copy of the corporation's Annual Report for the fiscal
year ended December 31, 2009 may be obtained, at no cost, by
contacting Cheryl Wynings, Investor Relations, First Keystone
Corporation, 111 West Front Street, Berwick, Pennsylvania 18603,
telephone: 570.752.3671.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 4, 2010: THE 2010
PROXY STATEMENT AND THE 2009 ANNUAL REPORT ON FORM 10K ARE ALSO
AVAILABLE AT: WWW.FKYSCORP.COM.
Whether or not you expect to attend the Annual Meeting in
person, we ask you to complete, sign, date and promptly return
your proxy form. By so doing, you will ensure your proper
representation at the meeting. The prompt return of your signed
proxy will also save the corporation the expense of additional
proxy solicitation. The execution and delivery of your proxy
does not affect your right to vote in person if you attend the
meeting.
By Order of the Board of Directors,
/s/ J. Gerald Bazewicz
J. Gerald Bazewicz, President
Berwick, Pennsylvania
March 24, 2010
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF FIRST KEYSTONE CORPORATION TO BE HELD ON MAY 4, 2010
Table of Contents
_________________
Page
____
General Information 3
Introduction, Date, Time and Place of
Annual Meeting 3
Solicitation and Voting of Proxies 3
Revocability of Proxy 4
Voting Securities, Record Date and Quorum 4
Vote Required for Approval of Proposals 4
Governance of the Company 5
Code of Ethics 6
Committees of the Board of Directors 6
Committees of the Bank 7
Board Meetings and Attendance 8
Shareholder Communications 8
Shareholder Proposals and Nominations 8
Proposal No. 1: Election of Directors 9
Information as to Directors and Nominees 10
Share Ownership 11
Principal Owners 11
Beneficial Ownership by Officers,
Directors and Nominees 12
Directors' Compensation Table 14
Compensation of Directors 14
Report of the Audit Committee 14
Compensation Discussion and Analysis 16
Summary Compensation Table 23
Principal Officers of the Bank and the Corporation 32
Legal Proceedings 33
Proposal No. 2: Ratification of Independent Auditors 33
Section 16(A) Beneficial Ownership Reporting
Compliance 33
Availability of Form 10-K 34
Other Matters 34
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF FIRST KEYSTONE CORPORATION TO BE HELD ON MAY 4, 2010
GENERAL INFORMATION
INTRODUCTION, DATE, TIME AND PLACE OF ANNUAL MEETING
____________________________________________________
First Keystone Corporation, a Pennsylvania business
corporation and registered bank holding company, furnishes this
Proxy Statement in connection with the solicitation, by its Board
of Directors, of proxies to be voted at the Annual Meeting of
Shareholders and at any adjournment or postponement of the Annual
Meeting. The corporation will hold the meeting on Tuesday, May
4, 2010, at 10:00 a.m., Eastern Daylight Time, at the McBride
Memorial Library, Community Room, 500 Market Street, Berwick,
Pennsylvania 18603.
The principal executive office of the corporation is located
at First Keystone National Bank, 111 West Front Street, Berwick,
Pennsylvania 18603. The bank is the sole, wholly owned
subsidiary of the corporation. The telephone number for the
corporation is 570.752.3671. All inquiries should be directed to
J. Gerald Bazewicz, President of the corporation and the bank.
SOLICITATION AND VOTING OF PROXIES
__________________________________
By properly completing and returning your proxy form, a
shareholder is appointing the proxy holders to vote his or her
shares as the shareholder specifies on the proxy. If a
shareholder signs the proxy but does not make any selection, the
proxy holders will vote the proxy:
* FOR the election of the nominees for Class B Director
named in this proxy statement; and
* FOR the ratification of the selection of J. H.
Williams & Co. as the independent auditors for the
corporation for the year ending December 31, 2010.
The execution and return of your proxy will not affect your
right to attend the Annual Meeting and vote in person.
The corporation will pay the cost of preparing, assembling,
printing, mailing and soliciting proxies and any additional
material that the corporation may furnish shareholders in
connection with the Annual Meeting. In addition to the use of
the mail, directors, officers and employees of the corporation
and the bank may solicit proxies personally, by telephone,
telecopier or other electronic means. The corporation will not
pay any additional compensation for the solicitation. The
corporation will make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners and will reimburse
them for their reasonable forwarding expenses.
Proxy Statement Page 3
REVOCABILITY OF PROXY
_____________________
A shareholder who returns a proxy may revoke the proxy at
any time before it is voted only:
* By executing a later dated proxy; or
* By attending the Annual Meeting and voting in
person.
VOTING SECURITIES, RECORD DATE AND QUORUM
_________________________________________
At the close of business on March 9, 2010, the corporation
had 5,440,196 shares of common stock outstanding, par value $2.00
per share. Our common stock is the corporation's only issued and
outstanding class of stock. The corporation also had 247,571
shares held in treasury, as issued but not outstanding shares on
that date. The corporation's Articles of Incorporation authorize
the issuance of up to 10,000,000 shares of common stock and up to
500,000 shares of preferred stock. As of March 9, 2010, no
shares of preferred stock were issued or outstanding.
Only shareholders of record as of the close of business on
March 9, 2010 may vote at the Annual Meeting. Cumulative voting
rights do not exist with respect to the election of directors.
On all matters to come before the Annual Meeting, each
shareholder is entitled to one vote for each share of common
stock held on the record date.
Pennsylvania law and the bylaws of the corporation require
the presence of a quorum for each matter that shareholders will
vote on at the Annual Meeting. The presence, in person or by
proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast constitutes
a quorum for the transaction of business at the Annual Meeting.
The corporation will count votes withheld and abstentions in
determining the presence of a quorum for a particular matter.
The corporation will not count broker non votes in determining
the presence of a quorum for a particular matter. A broker non
vote occurs when a broker nominee, holding shares for a
beneficial owner, does not vote on a particular proposal because
the nominee does not have discretionary voting power with respect
to that item, and has not received instructions from the
beneficial owner. Those shareholders present, in person or by
proxy, may adjourn the meeting to another time and place if a
quorum is lacking.
VOTE REQUIRED FOR APPROVAL OF PROPOSALS
_______________________________________
Assuming the presence of a quorum, the 4 nominees for
director receiving the highest number of votes cast by
shareholders will be elected. Votes withheld from a nominee and
broker non votes will not be cast for the nominee.
Assuming the presence of a quorum, ratification of the
selection of independent auditors requires the affirmative vote
of a majority of all votes cast by shareholders, in person or by
proxy, on the matter. Abstentions and broker non votes are not
votes cast and, therefore, do not count either for or against
ratification. Abstentions and broker non votes, however, have
the practical effect of reducing the number of affirmative votes
required to achieve a majority for each matter by reducing the
total number of shares voted from which the majority is
calculated.
Page 4 First Keystone Corporation
GOVERNANCE OF THE COMPANY
Our Board of Directors believes that the purpose of
corporate governance is to ensure that we maximize shareholder
value in a manner consistent with legal requirements and the
highest standards of integrity. The Board has adopted and
adheres to corporate governance practices which the Board and
senior management believe promote this purpose and are sound and
represent best practices.
BOARD LEADERSHIP STRUCTURE
__________________________
First Keystone Corporation separates the roles of CEO and
Chairman of the Board in recognition of the differences between
the two roles. The CEO is responsible for setting the strategic
direction for the corporation and the day to day operation and
performance of the corporation, while the Chairman of the Board
provides guidance to the CEO and sets the agenda for Board
meetings and presides over meetings of the Board. Mr. Robert E.
Bull, our Chairman, has been a director for over 50 years,
including serving as Chairman the past 30 years. The Board
believes the separated roles of CEO and Chairman are in the best
interest of shareholders because it promotes both strategic
development and facilities information flow between management
and the Board, both essential for effective governance.
The corporation's Board of Directors oversees all business,
property and affairs of the corporation. The Chairman and the
corporation's officers keep the members of the Board informed of
the corporation's business through discussions at Board meetings
and by providing them with reports and other materials. The
directors of the corporation also serve as the directors of the
corporation's wholly owned bank subsidiary, First Keystone
National Bank, upon election by the corporation.
Currently, our Board of Directors has 9 members. Based on
the qualifications for independence established under the
Securities and Exchange Commission ("SEC") and NASDAQ standards
for independence, John Arndt, Don E. Bower, Joseph B. Conahan,
Jr., Jerome F. Fabian, and David R. Saracino meet the standards
for independence. Only independent directors serve on our Audit
Committee.
In determining the directors' independence, the Board of
Directors considered loan transactions between the bank and the
directors, their family members and businesses with whom they are
associated, as well as any contributions made to non profit
organizations with whom they are associated.
RISK MANAGEMENT
_______________
The Board's role in the corporation's risk oversight process
includes receiving regular reports from members of senior
management on areas of material risk to the corporation,
including operational, financial, legal and regulatory, and
strategic and reputational risks. The Board receives reports
from the various committees of the Board. When a committee
presents a report, the Chairman of the relevant committee reports
on the discussion to the full Board during the committee reports
portion of the Board meetings. This enables to the Board and its
committees to coordinate the risk oversight role, particularly
with respect to risk interrelationships. As part of its charter,
the Audit Committee discusses our policies with respect to risk
assessment and management.
DIVERSITY
_________
In considering whether to recommend any candidate for
inclusion in the Board's slate of recommended director nominees,
including candidates recommended by shareholders, the Board of
Directors has determined that the Board must have the right
diversity. This includes the candidate's integrity, business
acumen, age, experience, commitment, diligence, conflicts of
interest and the ability
Proxy Statement Page 5
to act in the interests of all shareholders. The Board seeks
nominees with a broad diversity of experience, professions,
skills, geographic representation and backgrounds. Nominees are
not discriminated against on the basis of race, religion,
national origin, sexual orientation, disability or any other
basis proscribed by law.
CODE OF ETHICS
As required by law and regulation, in 2003 we adopted our
Code of Ethics to be applicable to our directors and senior
officers. The Code of Ethics is posted on our website at
www.firstkeystonecorporation.com, which we filed with the SEC as
exhibit 14 on Form 8K on January 11, 2007.
COMMITTEES OF THE BOARD OF DIRECTORS
The corporation's board of directors has, at present, an
audit committee.
AUDIT COMMITTEE. Members of the Audit Committee, during
2009, were David R. Saracino, Chairman, Don E. Bower, and Jerome
F. Fabian, each of whom the Board of Directors has determined
satisfies the NASDAQ independence and audit committee
qualification standards. The Audit Committee met 4 times during
2009. The principal duties of the Audit Committee are set forth
in its charter which is available on our website at
www.firstkeystonecorporation.com under the governance documents
menu. The duties include reviewing significant audit and
accounting principles, policies and practices, reviewing
performance of internal auditing procedures, reviewing reports of
examination received from regulatory authorities and recommending
annually, to the Board of Directors, the engagement of an
independent certified public accountant.
The Board of Directors has determined that David R. Saracino
is an "audit committee financial expert" and "independent" as
defined under applicable SEC and NASDAQ rules in 2009. The Board
deemed Mr. Saracino a "financial expert" as he possesses the
following attributes:
* An understanding of financial statements;
* Proficiency in assessing the general utilization of such
principles in connection with accounting for estimates,
accruals and reserves;
* Lengthy experience preparing, auditing, analyzing and
evaluating financial statements;
* Understanding of internal controls and procedures for
financial reporting; and
* Understanding of audit committee functions.
OVERSIGHT OF EXECUTIVE COMPENSATION AND DIRECTOR NOMINATIONS
____________________________________________________________
During 2009, the corporation did not have formal nominating
or compensation committees. The Board determined that it is
appropriate for the corporation not to have a nominating or
compensation committee in view of the corporation's relative
size, stability of the corporation's Board of Directors, and the
historic involvement of the entire Board in the director
selection process and in the compensation process. Because there
is no formal nominating or compensation committee, the
corporation does not have a formal charter for such committees.
Page 6 First Keystone Corporation
COMMITTEES OF THE BANK
The Bank's board of directors maintains standing committees:
trust, asset liability management, marketing, loan
administration, human resources, building and executive. The
composition of these committees is described below:
Name Trust ALCO Marketing
____ _____ _____ ________
John E. Arndt X X
J. Gerald Bazewicz X X* X
Don E. Bower X
Robert A. Bull X X X
Robert E. Bull X X
Joseph B. Conahan, Jr. X* X
Jerome F. Fabian X*
John G. Gerlach X X
David R. Saracino X
Number of Meetings
Held in 2009 12 4 4
Loan Human
Name Administration Resources
____ _____________ ________
John E. Arndt X*
J. Gerald Bazewicz X X
Don E. Bower X* X
Robert A. Bull X
Robert E. Bull X
Joseph B. Conahan, Jr. X
Jerome F. Fabian X X
John G. Gerlach X
David R. Saracino X
Number of Meetings
Held in 2009 4 1
Name Executive Building
____ _________ ________
John E. Arndt X
J. Gerald Bazewicz X X
Don E. Bower X
Robert A. Bull
Robert E. Bull X* X
Joseph B. Conahan, Jr.
Jerome F. Fabian X
John G. Gerlach X*
David R. Saracino X X
Number of Meetings
Held in 2009 0 2
*Denotes Chairman of Respective Committee
TRUST COMMITTEE - This committee ensures that all trust
activities of the bank are performed in a manner that is
consistent with the legal instrument governing the account,
prudent trust administration practices and approved trust policy.
ASSET/LIABILITY COMMITTEE - This committee reviews
asset/liability committee reports and provides support and
discretion in managing the bank's net interest income, liquidity
and interest rate sensitivity positions.
MARKETING COMMITTEE - This committee provides guidance to
management in formulating marketing/sales plans and programs to
assist in evaluating the performance of the bank relative to
these plans.
LOAN ADMINISTRATION COMMITTEE - This committee monitors
loan review and compliance activities. Also, the committee
ensures that loans are made and administered in accordance with
the loan policy.
HUMAN RESOURCES COMMITTEE - This committee helps ensure
that a sound human resources management system is developed and
maintained. This committee determines compensation for non executive
officers and employees. The entire Board of Directors
acts as the Compensation Committee for the corporation and
determines compensation for the executive officers.
EXECUTIVE COMMITTEE - This committee exercises the
authority of the Board of Directors in the management of the
business of the bank between the dates of regular Board of
Directors meetings.
Proxy Statement Page 7
BUILDING COMMITTEE - This committee makes recommendations
to the Board relating to the bank's physical assets, including
both current and proposed physical assets.
BOARD MEETINGS AND ATTENDANCE
_____________________________
The members of the Board of Directors of the corporation
also serve as members of the Board of Directors of First Keystone
National Bank. During 2009, the corporation's Board of Directors
held 6 meetings. Each of the directors attended at least 75% of
the combined total number of meetings of the corporation's Board
of Directors and the committees of which he is a member.
Although there is no formal policy, all directors are expected to
attend the Annual Meeting of Shareholders. All directors
attended the 2009 Annual Meeting of Shareholders.
SHAREHOLDER COMMUNICATIONS
__________________________
The Board of Directors does not have a formal process for
shareholders to send communications to the Board. Due to the
infrequency of shareholder communications to the Board of
Directors, the Board does not believe that a formal process is
necessary.
SHAREHOLDER PROPOSALS AND NOMINATIONS
_____________________________________
If a shareholder wants us to include a proposal in our proxy
statement for presentation at our 2010 Annual Meeting of
Shareholders, the proposal must be received by us at our
principal executive offices at 111 West Front Street, Berwick,
Pennsylvania 18603, no later than November 24, 2010. Any
proposal must comply with Securities and Exchange Commission
regulations regarding the inclusion of shareholder proposals in
corporation sponsored proxy materials. If a shareholder proposal
is submitted to the corporation after November 24, 2010, it is
considered untimely; and, although the proposal may be considered
at the annual meeting, the corporation is not obligated to
include it in the 2011 Proxy Statement.
The corporation's Board of Directors nominates individuals
for the position of director and considers diversity in
identifying nominees for director. Neither the corporation nor
the bank has a nominating committee. In addition, a shareholder
who desires to propose an individual for consideration by the
Board of Directors as a nominee for director should submit a
proposal in writing to the Secretary of the corporation in
accordance with Section 10.1 of the corporation's bylaws. Any
shareholder who intends to recommend nomination of any candidate
for election to the Board of Directors must notify the Secretary
of the corporation in writing not less than 120 days prior to the
date of any meeting of shareholders called for the election of
directors and must provide the specific information listed in
Section 10.1 of the bylaws. You may obtain a copy of the
corporation's bylaws by writing to John E. Arndt, Secretary,
First Keystone Corporation, 111 West Front Street, Berwick,
Pennsylvania 18603. Specifically, a shareholder who recommends a
director candidate for consideration to the Board of Directors
must provide the candidate's name, biographical data, and
qualifications. A written statement from the candidate,
consenting to be named as a candidate, and if nominated and
elected, to serve as a director, should accompany any such
recommendation.
The process that the Board of Directors uses for identifying
and evaluating nominees for director is as follows: When there is
a vacancy on the Board, either through the retirement of a
director or the Board's determination that the size of the Board
should be increased, nominations to fill that vacancy are made by
current directors on the Board. The name of any individual
recommended by the directors is provided to Chairman Robert E.
Bull, who contacts the prospective director nominee and generally
meets with him or her. The members of the Board of Directors
then may meet with the prospective director nominee. If a
nominee is qualified and will make a positive addition to the
Board, the Board of Directors then nominates the candidate.
Page 8 First Keystone Corporation
PROPOSAL NO. 1: ELECTION OF CLASS B DIRECTORS
The corporation's bylaws provide that its Board of Directors
will manage the corporation's business. Sections 10.2 and 10.3
of the Bylaws provide that the number of directors on the Board
will not be less than 7 nor more than 25 and that the Board of
Directors will be classified into 3 classes, each class to be
elected for a term of 3 years. Within the foregoing limits, the
Board of Directors may, from time to time, fix the number of
directors and their classifications. No person over 70 years old
may serve as director with the exception of Mr. Robert E. Bull.
Section 11.1 of the bylaws require that a majority of the
remaining members of the Board of Directors, even if less than a
quorum, will select and appoint directors to fill vacancies on
the Board, and each person so appointed will serve as director
until the expiration of the term of office of the class of
directors to which he or she was appointed.
Section 10.3 of the bylaws provide for a classified Board of
Directors with staggered three year terms of office.
Accordingly, at the 2010 Annual Meeting of Shareholders, 4 Class
B Directors will be elected to serve for a three year term and
until their successors are properly elected and qualified. The
Board of Directors of the corporation has nominated the current
Class B Directors to serve as Class B Directors for the next
three year term of office. The nominees for reelection this year
are as follows:
* John E. Arndt, director since 1995;
* J. Gerald Bazewicz, director since 1986;
* Robert E. Bull, director since 1956; and
* Joseph B. Conahan, Jr., director since 2007.
Each nominee has consented to serve a three year term of
office and until his successor is elected and qualified.
Unless otherwise instructed, the proxy holders will vote the
proxies for the election of these 4 nominees. If any nominee
should become unavailable for any reason, proxies will be voted
in favor of a substitute nominee named by the Board of Directors
of the corporation. A majority of the directors of the
corporation, in office, may appoint a new director to fill any
vacancy occurring on the Board for any reason, and the new
director will serve until the expiration of the term of the class
of directors to which he or she was appointed.
The corporation's Articles of Incorporation provide that
cumulative voting rights will not exist with respect to the
election of directors. Accordingly, each share of common stock
entitles its owner to cast one vote for each nominee. For
example, if a shareholder owns 10 shares of common stock, he or
she may cast up to 10 votes for each director to be elected.
The Board of Directors recommends that shareholders vote
FOR the election of the above named nominees.
Proxy Statement Page 9
INFORMATION AS TO DIRECTORS AND NOMINEES
________________________________________
The following selected biographical information about the
directors and nominees for director is accurate as of March 9,
2010, and includes each person's business experience for at least
the past 5 years.
CURRENT CLASS B DIRECTORS WHOSE TERM EXPIRES IN 2010
AND NOMINEES FOR CLASS B DIRECTOR WHOSE TERM WILL EXPIRE IN 2013
John E. Arndt Mr. Arndt (age 48), is an insurance
broker and the owner of Arndt
Insurance Agency in Berwick,
Pennsylvania. He has served as a
director of the corporation and the
bank since 1995. Mr. Arndt has 25
years experience in the insurance
field, including 15 years overseeing
the management of his own insurance
agency.
J. Gerald Bazewicz Mr. Bazewicz (age 61), serves as the
President and Chief Executive Officer
of the corporation and the bank, a
position he has held since 1987. He
has served as a director of the
corporation and the bank since 1986.
Mr. Bazewicz has 39 years of banking
experience and a strong financial
background which includes a B.S. in
Finance and an MBA in Finance.
Robert E. Bull Mr. Bull (age 87), now retired,
practiced as an attorney at the law
firm Bull, Bull & Knecht, LLP, of
which he remains a partner. He has
been the Chairman of the Board of the
corporation since 1983 and of the
bank since 1981. He has served as a
director of the corporation since
1983 and of the bank since 1956. Mr.
Bull has a strong understanding of
our people and products which he
acquired over five decades of service
on our Board.
Joseph B. Conahan, Jr. Dr. Conahan (age 66), is an
Ophthalmologist and President of
Pocono Eye Associates, Inc. Dr.
Conahan has been a director of the
corporation and the bank since 2007.
Previously, he was a director at
Pocono Community Bank since 1998.
Dr. Conahan has strong management
skills and has served on the Board of
Directors of a regional medical
center.
CLASS C DIRECTORS WHOSE TERM EXPIRES IN 2011
Don E. Bower Mr. Bower (age 61), is the President
and owner of Don E. Bower, Inc., an
excavation contracting corporation
located in Berwick, Pennsylvania. He
has been a director of the
corporation and the bank since 2001.
Mr. Bower has successfully developed
his business over 35 years and has
strong executive leadership and
management experience.
Robert A. Bull Mr. Bull (age 57), is an attorney at
the law firm Bull, Bull, & Knecht,
LLP. Mr. Bull has been a director of
the corporation and the bank since
2006. He has been an attorney for 30
years and has become knowledgeable in
banking since his law firm functions
as the corporation's solicitor.
Page 10 First Keystone Corporation
CLASS A DIRECTORS WHOSE TERM EXPIRES IN 2012
Jerome F. Fabian Mr. Fabian (age 67), is the President
and owner of Tile Distributors of
America, Inc., located in Wilkes
Barre, Pennsylvania. He has served
as a director of the corporation and
the bank since 1998. Mr. Fabian has
been a successful entrepreneur with
extensive sales and marketing
experience.
John G. Gerlach Mr. Gerlach (age 68), is the
President of Pocono Community Bank, a
division of First Keystone National
Bank. He has been a director of the
corporation and the bank since 2007.
Previously, he was a director of
Pocono Community Bank since 1998.
Mr. Gerlach has over 40 years of
banking experience. He possesses
excellent banking knowledge and
served on the Board of Directors of
the Federal Reserve Bank of
Philadelphia.
David R. Saracino Mr. Saracino (age 65), is the former
Vice President, Cashier, and Chief
Financial Officer of First Keystone
National Bank. Mr. Saracino has
served as a director of the
corporation and the bank since 2006.
He has excellent accounting skills
and has been deemed our financial
expert on the Audit Committee of the
corporation.
Robert E. Bull is the father of Robert A. Bull.
SHARE OWNERSHIP
PRINCIPAL OWNERS
________________
The following table sets forth, as of March 9, 2010, the
name and address of each person who owns of record or who is
known by the Board of Directors to be the beneficial owner of
more than 5% of the corporation's outstanding common stock, the
number of shares beneficially owned by the person and the
percentage of the corporation's outstanding common stock so
owned.
________________________________________________________________________
Amount and Percent of
Nature of Outstanding
Beneficial Common Stock
Name and Address Ownership Beneficially Owned
________________________________________________________________________
Berbank 391,627 7.20%
First Keystone National Bank
Trust Department
111 West Front Street
Berwick, PA 18603
____________________
The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as
securities to which the individual has or shares voting or investment power
or has the right to acquire beneficial ownership within 60 days after
March 9, 2010. Beneficial ownership may be disclaimed as to certain of the
securities.
Proxy Statement Page 11
Nominee registration for the common stock held by the Trust Department of
the bank on behalf of various trusts, estates and other accounts for which
the bank acts as fiduciary with sole voting and dispositive power over
308,026 shares and as fiduciary with shared voting and dispositive power
over 83,601 shares. Total does not include 233,109 shares held by the
Trust Department of the bank for which the bank does not have sole or
shared voting or dispositive power. The Trust Department intends to cast
all shares under its voting power for the election of the nominees for
director named in this proxy statement and for the ratification of J. H.
Williams & Co., LLP, independent auditors of the corporation.
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES
________________________________________________________
The following table sets forth, as of March 9, 2010, the
amount and percentage of the outstanding common stock
beneficially owned by each director, nominee for director, and
other named executive officer of the corporation. The table also
indicates the total number of shares owned by all directors,
nominees for director, and executive officers of the corporation
and the bank as a group. A person owns his shares directly as an
individual unless otherwise indicated.
Number of
Name Shares Owned Percentage
____ _____________ _______
Nominee for Class B Directors
(to serve until 2013)
And Class B Directors
_____________________
John E. Arndt 9,686 -
J. Gerald Bazewicz 39,096
Robert E. Bull 191,890 3.53%
Joseph B. Conahan, Jr. 51,641
Class C Directors
(to serve until 2011)
____________________
Don E. Bower 51,383
Robert A. Bull 71,608 1.32%
Class A Directors
(to serve until 2012)
____________________
Jerome F. Fabian 41,303
John G. Gerlach 8,682
David R. Saracino 12,053
Other Named Executive Officers
______________________________
Matthew P. Prosseda 5,610
Diane C. Rosler 2,707
All Directors and Executive
Officers as a Group
(13 Persons in Total) 493,820 9.08%
____________________
The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as
securities to which the individual has or shares voting or investment power
or has the right to acquire beneficial ownership within 60 days after
March 9, 2010. Beneficial ownership may be disclaimed as to certain of the
securities.
Page 12 First Keystone Corporation
Information furnished by the directors and the corporation.
Less than 1% unless otherwise indicated.
Includes 8,083 shares held individually by Mr. Arndt, and 1,500 shares held
individually by his spouse, and 103 shares held as custodian for his
children.
Includes 18,933 shares held individually by Mr. Bazewicz, 7,855 shares held
in his bank 401(k) plan, 6,235 shares held jointly with his spouse, 873
shares held individually by his spouse, and 5,200 shares which may be
purchased upon the exercise of stock options.
Includes 103,495 shares held individually by Mr. R.E. Bull, 4,725 shares
held by Bull, Bull & Knecht, LLP, a law firm of which Mr. Bull is a
partner, and 83,670 shares held by the Sara E. Bull Decedent Estate Trust
of which Mr. Bull is the trustee.
Includes 41,449 shares held individually by Dr. Conahan and 10,192 shares
held jointly with his spouse.
Includes 49,928 shares held individually by Mr. Bower, 700 shares held
jointly with his spouse, and 755 shares held as custodian for his
grandchildren.
Includes 27,208 shares held individually by Mr. R.A. Bull, 4,725 shares
held by Bull, Bull & Knecht, LLP, a law firm of which Mr. Bull is a
partner, 32,022 shares held jointly with his spouse, and 7,653 shares held
individually by his spouse.
Includes 7,935 shares held individually by Mr. Fabian, 15,252 shares by the
Jerome F. Fabian Trust Under Agreement for which Mr. Fabian exercises
dispositive power, and 18,116 shares held jointly with his spouse.
Includes 500 shares held individually by Mr. Gerlach, 7,432 shares held
jointly with his spouse, and 750 shares which may be purchased upon the
exercise of stock options.
Includes 3,228 shares pledged securities.
Includes 3,297 shares held individually by Mr. Prosseda, 1,038 shares held
in his bank 401(k) plan, and 1,275 shares which may be purchased upon the
exercise of stock options.
Includes 721 shares held in her bank 401(k) plan and 1,986 shares which may
be purchased upon the exercise of stock options.
Proxy Statement Page 13
DIRECTORS' COMPENSATION TABLE
FEES EARNED
OR PAID
IN CASH STOCK
NAME ($) AWARDS
____ _______ ______
John Arndt 31,250.00 ---
Don E. Bower 29,100.00 ---
Robert A. Bull 31,900.00 ---
Robert E. Bull 33,600.00 ---
Joseph B. Conahan, Jr. 29,800.00 ---
Jerome F. Fabian 27,350.00 ---
David R. Saracino 29,800.00 ---
Robert J. Wise 3,150.00 ---
NON-EQUITY
OPTION INCENTIVE PLAN
NAME AWARDS COMPENSATION
____ ______ ____________
John Arndt --- ---
Don E. Bower --- ---
Robert A. Bull --- ---
Robert E. Bull --- ---
Joseph B. Conahan, Jr. --- ---
Jerome F. Fabian --- ---
David R. Saracino --- ---
Robert J. Wise --- ---
CHANGE IN PENSION
VALUE AND
NON-QUALIFIED
DEFERRED ALL OTHER
COMPENSATION COMPENSATION
NAME EARNINGS ($)
____ ________ ____________
John Arndt --- ---
Don E. Bower --- ---
Robert A. Bull --- ---
Robert E. Bull --- ---
Joseph B. Conahan, Jr. --- ---
Jerome F. Fabian --- ---
David R. Saracino --- ---
Robert J. Wise --- ---
TOTAL
($)
_____
John Arndt 31,250.00
Don E. Bower 29,100.00
Robert A. Bull 31,900.00
Robert E. Bull 33,600.00
Joseph B. Conahan, Jr. 29,800.00
Jerome F. Fabian 27,350.00
David R. Saracino 29,800.00
Robert J. Wise 3,150.00
Deceased February 20, 2009.
COMPENSATION OF DIRECTORS
_________________________
During 2009, each member of the corporation's Board of
Directors received $700 for his attendance at the Annual Meeting.
Other corporate Board meetings met concurrently with the bank's
Board, and directors received no additional compensation. The
bank's directors received $700 for each directors' meeting
attended. Non employee directors received a $5,000 retainer and
$350 for each committee meeting attended. In addition, Chairman
Bull received an annual stipend of $1,000 and Secretary Arndt
received an annual stipend of $750. In the aggregate, the Board
of Directors received $258,750 for all Board of Directors'
meetings and committee meetings attended in 2009, including all
fees and stipends paid to all directors in 2009.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the corporation's financial
reporting process on behalf of the Board of Directors. In that
connection, the committee, along with the Board of Directors, has
formally adopted an audit committee charter setting forth its
responsibilities.
Management has the primary responsibility for the financial
statements and the reporting process including the systems of
internal control. In fulfilling its oversight responsibilities,
the committee reviewed the audited financial statements in the
Annual Report with management including a discussion of the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
Page 14 First Keystone Corporation
The committee reviewed with the independent auditors, who
are responsible for expressing an opinion on the conformity of
those audited financial statements with generally accepted
accounting principles, their judgments as to the quality, not
just the acceptability, of the corporation's accounting
principles and such other matters as are required to be discussed
with the committee under generally accepted auditing standards.
In addition, the committee has discussed with the independent
auditors the auditors' independence from management and the
corporation including the matters in written disclosures required
by the Independence Standards Board and considered the
compatibility of non audit services with the auditors'
independence.
The committee discussed the overall scope and plans for
their audits with the corporation's internal and independent
auditors. The committee meets with the internal and independent
auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the
corporation's internal controls and the overall quality of the
corporation's financial reporting. The corporation believes that
it has established appropriate policies and procedures to comply
with requirements of the Sarbanes Oxley Act of 2002. The
committee held 4 meetings during fiscal year 2009 in addition to
reviewing the quarterly results with the financial auditors prior
to press release.
With respect to the corporation's outside auditors, the
committee, among other things, discussed with J.H. Williams &
Co., LLP matters relating to its independence, including the
written disclosures made to the committee by the outside auditors
and the letter from the outside auditors as required by
applicable requirements of the Public Corporation Accounting
Oversight Board regarding the independent accountant's
communications with the audit committee concerning independence.
In reliance on the reviews and discussions referred to
above, the committee recommended to the Board of Directors (and
the Board has approved) that the audited financial statements be
included in the Annual Report on Form 10K for the year ended
December 31, 2009 for filing with the Securities and Exchange
Commission. The committee and the Board of Directors have also
approved the selection of the corporation's independent auditors
for 2010.
Aggregate fees billed to the corporation and the bank by J.
H. Williams & Co., LLP for services rendered during the years
ended December 31, 2009 and 2008 were as follows:
Year Ended December 31,
2009 2008
____ ____
Audit fees $101,500 $116,000
Audit related fees 0 0
Tax fees 8,500 7,500
All other fees 0 0
________ ________
Total $110,000 $123,500
======== ========
_______________
Audit Fees include fees billed for professional services rendered
for the audit of annual financial statement and fees billed for
the review of financial statements included in First Keystone
Corporation's Forms 10Q or services that are normally provided by
J. H. Williams & Co., LLP in connection with statutory and
regulatory filings or engagements.
Audit Related Fees include fees reasonably related to the audit
services provided by J. H. Williams & Co, LLP but not reported
under Audit Fees.
Tax Fees include fees billed for professional services rendered
by J. H. Williams & Co., LLP for tax compliance. These services
include preparation of Federal and State Annual Tax Returns for
the Corporation.
Proxy Statement Page 15
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITOR
_______________________________
The Audit Committee pre approves all audit and permissible
non audit services provided by the independent auditors. These
services may include audit services, audit related services, tax
services, and other services. The Audit Committee has adopted a
policy for the pre approval of services provided by the
independent auditors. Under the policy, pre approval is
generally provided for up to one year and any pre approval is
detailed as to the particular service or category of services and
is subject to a specific budget. In addition, the Audit
Committee may also pre approve particular services on a case by
case basis. For each proposed service, the independent auditor
is required to provide a detailed engagement letter.
The committee is comprised of 3 directors, all of whom are
considered "independent" as defined by the NASDAQ listing
standards. The Board of Directors has determined that no member
of the committee has a relationship with the corporation that
should interfere with his independence from the corporation or
its management.
The foregoing report has been furnished by the current
members of the committee.
MEMBERS OF THE AUDIT COMMITTEE
_____________________________
David R. Saracino, Chairman
Don E. Bower
Jerome F. Fabian
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
____________
The Board of Directors serves as the Compensation Committee
for the Bank and develops the bank's and the corporation's
executive compensation policy, with the guidance of the Human
Resources Committee. The Human Resources Committee consists of
independent directors and the Chief Executive Officer and helps
ensure that a sound human resources management system is
developed and maintained.
For the year 2009, executive compensation included base
salary, the opportunity for cash bonuses, health and welfare and
pension plans. The basic mission of the corporation's executive
compensation policy is to provide executives with a competitive
compensation package that attracts and retains qualified
executives while placing a portion of total pay at risk. At risk
elements of compensation may have no value or may be worth less
than the target value if goals are not met. At risk compensation
includes all components of core compensation other than base
salary, pension plans, and health and welfare benefits.
The compensation program is designed to reward the named
executive officers based on their level of assigned management
responsibilities, individual performance levels, and individual
value in the job marketplace. The Chief Executive Officer's
individual performance objectives are the same as the strategic
and financial performance objectives of the bank as a whole. For
other executives, individual performances objectives are set by
the Chief Executive Officer and a year end performance appraisal
on each executive is prepared and reviewed by the Board of
Directors. In 2009, the Board awarded only cash compensation as
the 1998 Stock Incentive Plan expired in 2009 and no management
incentive bonuses were paid since the required net income figure
for 2009 was not attained.
Page 16 First Keystone Corporation
EXECUTIVE OFFICERS' ROLE IN DETERMINING COMPENSATION
____________________________________________________
The executive compensation established by the Board of
Directors is based upon its overall subjective assessment of the
value of the services provided by each executive officer with
consideration given to performance factors and peer group
compensation information.
The Board considers information provided by the Chief
Executive Officer in determining the appropriate level of
compensation for other executives, including the Chief Executive
Officer's views on the appropriate levels of compensation for
other named executive officers for the ensuing year. No
executive officer other than the Chief Executive Officer attends
those portions of the Board meetings during which the performance
of the other named executive officers is evaluated or their
compensation is being determined. For compensation provided to
the Chief Executive Officer, the Board considers his performance,
the results of management decisions made by him, and the earnings
of the organization. The Chief Executive Officer is not present
during these discussions.
COMPENSATION CONSULTANT
_______________________
The firm of L. R. Webber Associates Inc. acts as a
compensation consultant for the bank. L. R. Webber was hired by
the Board of Directors. The bank requested that the consultant
provide compensation survey information and be available to
address the bank's questions. The consultant did not play a role
in setting compensation. In 2009, the role of L. R. Webber
Associates Inc. was to provide its annual compensation survey.
In addition, L. R. Webber Associates provided a custom peer
survey on compensation for the 12 institutions listed below.
BENCHMARKING
____________
The Board of Directors uses data from the L. R. Webber
Associates Inc. compensation survey of the Pennsylvania banking
and thrift industry to assist in determining executive pay. The
peer group of financial institutions chosen by the Board of
Directors for purposes of making a comparative analysis of
executive compensation does include some of the same financial
institutions incorporated in the peer group established to
compare shareholder returns as indicated in the performance graph
included in the Form 10K.
From the L. R. Webber survey, the financial institutions
chosen to benchmark included (11) banks and (1) thrift with
assets generally between $500 million and $1 billion with
headquarters located in Northeastern and Central Pennsylvania.
The financial institutions included:
- First Columbia Bank (Bloomsburg)
- Community Bank & Trust Company (Clarks Summit)
- Dime Bank (Honesdale)
- Ephrata National Bank (Ephrata)
- ESSA Bank & Trust (Stroudsburg)
- Fidelity Deposit & Discount Bank (Dunmore)
- First Citizens National Bank (Mansfield)
- First National Community Bank (Dunmore)
- Jersey Shore State Bank (Williamsport)
- Honesdale National Bank (Honesdale)
- Mid Penn Bank (Millerburg)
- Peoples National Bank (Hallstead)
Proxy Statement Page 17
As a result of the benchmarking, after reviewing base
salaries and benefits, no adjustments to compensation were
necessary in 2009, other than the normal annual salary increases.
The goal of First Keystone Corporation is to compensate at
approximately the average range mid point for each job
classification with at risk portion of compensation for the
executives to reward favorable overall bank earnings performance.
The executive positions reviewed were all in the mid point range
except for the Chief Financial Officer, which was below the mid
point range because of the limited amount of time the present CFO
served in this position.
BASE SALARY
___________
The Board of Directors determines base salary for the
executive officers with guidance from the Human Resources
Committee and from compensation surveys. For the base salary
paid to executive officers other than the Chief Executive
Officer, the Board of Directors considers information provided by
the Chief Executive Officer as to each executive officer's level
of individual performance, contribution to the organization,
scope of responsibilities, salary history and market levels
gathered from the compensation surveys. For the base salary paid
to the Chief Executive Officer, the Board of Directors, with the
Chief Executive Officer not being present, considers his
performance level, the results of management decisions made by
him and the earnings of the organization. The Board of Directors
considers the return on assets and return on equity when
determining whether or not the Chief Executive Officer's base pay
should be at the median, below the median, or above the median
provided in the compensation surveys. No particular weight is
assigned to any of the foregoing individual performance factors
and no specific performance targets are used in determining
whether an increase in base salary is warranted.
Decisions regarding base salary are made without
consideration of other forms of compensation provided. Bonuses
and long term incentive awards are intended to provide additional
incentive to the executives to achieve a higher level of success.
Adjusting the base salary to correspond with the amount of the
bonuses and long term incentive awards would defeat the purpose
of having at risk compensation. The at risk compensation
incorporates a performance target for the corporation as
described in cash bonuses below.
CASH BONUSES
____________
The purpose of the Management Incentive Compensation Plan
(the "Plan") is to provide incentives and awards to top
management employees who, through high levels of performance,
contribute to the success and profitability of the bank. The
bonus plan serves as short term incentives that align executive
pay with the annual performance of the corporation and is earned
through the achievement of overall annual earnings objectives.
It aligns management's interests with those of the shareholders
because, generally, the higher the net income for the year, the
larger the bonuses paid to management. The Plan is also designed
to support organizational objectives and financial goals, as
defined by the bank's Strategic and Financial Plans, by making
available additional, variable and contingent incentive
compensation. The required budget net income figure has
generally been 5% to 10% over the previous year's net income for
the corporation.
The Plan is based upon the achievement of a required budget
net income figure of approximately $8.0 million in 2009 before
any incentive award "pool" is formed. The calculation of share
of profits to be distributed to the Plan participants, and the
incentive compensation is constructed to provide awards that are
consistent with achieved profitability levels. The management
incentive bonuses are designed not to exceed a total of $75,000
annually and have never exceeded that amount. The incentive
formulas insure a level of incentive award that will enable the
bank to attract, retain, and motivate high quality management
personnel and support continued growth and profitability.
Page 18 First Keystone Corporation
The Plan is also established to augment regular salary and
benefits programs already in existence. It is not meant to be a
substitute for salary increases, but as a supplement to salary,
and, as stated earlier, as an incentive for performance that
contributes to outstanding levels of achievement.
A committee appointed by the Board recommends performance
levels to the Board for final action before the beginning of each
year with the approval of our annual budget. Plan participants
who are members of that committee shall not be entitled to vote
on matters relating to the eligibility for and/or determination
of their own incentive compensation awards. The committee, in
the exercise of its discretion with respect to the determination
of the amount of the incentive plan pool for any given plan year,
may take into account the presence or absence of nonrecurring or
extraordinary items of income, gain, expense, or loss, and any
and all factors that, in its sole discretion, may deem relevant.
Extraordinary occurrences may be excluded when calculating
performance results to insure that the best interests of the Bank
are protected and are not brought into conflict with the best
interest of plan participants. No management incentive cash
bonuses were paid in 2009, while the management incentive bonus
was $55,500 in 2008 and $0 in 2007.
Participation in the Plan is limited to the executive
management team. This management team includes the following
functional job titles: Chief Executive Officer/President,
Executive Vice President/Director of Lending, Senior Vice
President/Deposit/Operations Division Manager, Senior Vice
President/Technology Division Manager, and Vice President/Chief
Financial Officer. The management incentive pool created after
the achievement of a required budget net income is distributed to
the executive management team as follows:
CEO/President 45%
Executive Vice President 25%
Senior Vice President/CFO 10%
Senior Vice President/Operations 10%
Senior Vice President/IT 10%
LONG-TERM INCENTIVES
____________________
Long term corporation performance is best achieved through
an ownership culture that encourages long term performance
through the use of stock based awards. The Board of Directors
believes that stock option awards under the corporation's 1998
Stock Incentive Plan ("1998 Plan") provide a vehicle for long
term incentive compensation through financial rewards dependent
on future increases in the market value of the corporation's
stock. The purpose of the 1998 Plan was to advance the
development, growth and financial condition of the corporation
and its subsidiaries by providing incentives through
participation in the appreciation of capital stock of the
corporation in order to secure, retain and motivate personnel
responsible for the operation and management of the corporation
and its subsidiaries. The 1998 Plan expired in 2008 and the Board
of Directors will explore the possibility of implementing another
plan in the future.
The value realized by named executive officers from award
grants in prior years is not taken into account in the process of
setting compensation for the current year. We also do not
maintain any equity or other security ownership guidelines or
requirements.
401(K) PLAN
___________
The Board believes that it is essential for employees to
save for retirement and as such has provided all employees a
vehicle through which to do so. The Bank maintains a 401(k)
plan, which has a combined tax qualified savings feature and
profit sharing feature.
Proxy Statement Page 19
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
_____________________________________
The Supplemental Employee Retirement Plan ("SERP") rewards
certain executive officers for their long term contributions to
the bank. Additionally, to encourage the executives to continue
their employment with the corporation until retirement, the Board
believed it to be in the best interests of the corporation to
enter into salary continuation agreements with them. The
agreements were also established to reward certain executives for
past and future services to the corporation. The Board believes
the income benefit amounts are reasonable and consistent with the
compensation standards of Section 39 of the Federal Deposit
Insurance Company Improvement Act of 1991 and the related
implementing regulations.
Currently, the corporation maintains a SERP for which Mr.
Bazewicz and Mr. Prosseda participate. The SERP provides that if
the executive officer continues to serve as an officer of the
bank until a stated retirement age of 60 years (for Bazewicz) and
62 years (for Prosseda), the bank will pay 240 guaranteed
consecutive monthly payments commencing on the first day of the
month following the officer's retirement age and the termination
of employment in the amounts indicated in this proxy. Generally,
no benefit will be paid if the executive officer voluntarily
terminates employment prior to attaining the stated retirement
age.
The Board has also determined that it is in the best
interests of the corporation to finance the SERP benefits by
purchasing life insurance on the life of certain executives. The
Board selected Bank Compensation Strategies Group, a benefits
consulting firm endorsed by the American Banking Association and
many other state bank associations to calculate cost projections
and choose life insurance appropriate to finance the obligations.
HEALTH AND WELFARE PLANS
________________________
Health and welfare plans are not tied to corporation or
individual performance. The costs of providing such benefits to
all employees are not taken into account when determining
specific salaries of the named executives and is seen as a cost
of doing business.
Group life insurance, group disability, vision benefits and
health insurance are available to all employees, as well is an
IRS 125 plan. Such plans are standard in the industry and in the
geographic area for all industries and necessary to compete for
talented employees at all levels of the corporation. Named
executives participate in these plans under the same terms and
conditions as other employees.
Health insurance premiums are partially paid by employees
through payroll deductions for the employee share of the health
care cost.
TRIGGERING EVENTS IN CONTRACTS
______________________________
Presently, there are no named executive officers who are
parties to employment or consulting agreements with the
corporation as Mr. Gerlach's consulting agreement expired in
2009.
Under the Supplemental Executive Retirement Plans to which
both Mr. Bazewicz and Mr. Prosseda are parties, the triggering
events are change of control, disability, involuntary termination
and death.
Page 20 First Keystone Corporation
The Compensation Committee believes that the triggering
events in these agreements are appropriate in that they encourage
executives to act in the best interests of the shareholders in
evaluating any change of control opportunities and it keeps the
executives focused on running the corporation in the face of real
or rumored corporate transactions. The Compensation Committee
also believes that it is appropriate to provide the executives a
benefit under the Supplemental Executive Retirement Plan in the
event the executive becomes disabled and a benefit to his
beneficiaries in the event of this death as consideration for the
executive's past employment with the bank. Additionally, as the
Supplemental Executive Retirement Plan is a benefit upon which
the executive will rely upon for retirement income, the bank also
believes that it is important to provide the executive with a
benefit under the Supplemental Executive Retirement Plan if the
executive is terminated without cause before retirement age.
ACCOUNTING AND TAX TREATMENTS
_____________________________
Sections 162(m) of the Internal Revenue Code generally
limits the tax deductibility of compensation paid in one year to
highly compensated employees to $1 million. Performance based
compensation is not subject to the limits on deductibility of
Section 162(m) provided such compensation meets certain
requirements. The Compensation Committee strives to provide the
named executive officers with compensation which will preserve
the tax deductibility of compensation paid. Given the current
level of compensation, the Compensation Committee does not feel
that it is necessary to have a formal policy with regard to
Section 162(m).
MATERIAL DIFFERENCES IN NAMED EXECUTIVE OFFICERS' COMPENSATION
______________________________________________________________
The Named Executive Officers are compensated based upon
their respective position and longevity with the bank. Mr.
Gerlach's compensation in 2007 and 2008 was determined after
negotiations between Mr. Gerlach and the corporation during
merger negotiations. Mr. Gerlach's compensation also takes into
consideration his previous role as president of Pocono Community
Bank, the one year term of the employment agreement, followed by
a one year consulting agreement. Mr. Gerlach agreed to continue
his employment after his initial two years. Mr. Gerlach is
subject to the three year noncompetion and nonsolicitation
provision regardless of the reason of his termination of
employment.
CONCLUSION
__________
The Compensation Committee believes the amount and types of
compensation provided to the Executives are competitive and
appropriate for First Keystone Corporation to attain its short
and long term objectives and goals. The compensation programs
are designed to provide an incentive to the Executive on both a
short term and long term basis. The programs have been tailored
by First Keystone Corporation so that the various elements of
compensation align the interests of our shareholders and those of
the Executives to maximize shareholder value.
COMPENSATION COMMITTEE REPORT
_____________________________
The Board of Directors has reviewed and discussed the
Compensation Discussion and Analysis with management, and based
on the review and discussions, the Board of Directors concluded
that the Compensation Discussion and Analysis be included in the
corporation's proxy statement.
Proxy Statement Page 21
BOARD OF DIRECTORS
__________________
Robert E. Bull, Chairman
J. Gerald Bazewicz, President
John E. Arndt, Secretary
Don E. Bower
Robert A. Bull
Dr. Joseph B. Conahan, Jr.
Jerome F. Fabian
John G. Gerlach
David R. Saracino
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
___________________________________________________________
The Board of Directors, which includes J. Gerald Bazewicz,
Chief Executive Officer, functions as the Compensation Committee.
For compensation paid to executive officers other than the Chief
Executive Officer, the Board of Directors considers information
provided by the Chief Executive Officer. For compensation paid
to the Chief Executive Officer, the Board of Directors, with Mr.
Bazewicz not being present, determines his compensation, as
outlined above under "Base Salary".
EXECUTIVE COMPENSATION
______________________
During the beginning of 2010, the Board of Directors
conducted a risk assessment of the bank's compensation program.
The Board concluded that the program is balanced, does not
motivate imprudent risk taking, and is not reasonably likely to
have a material adverse effect on the bank.
The table below shows information concerning the annual and
long term compensation for services rendered in all capacities to
the corporation and the bank for the fiscal year ended December
31, 2009 of those persons who were:
* all individuals who served as the Principal
Executive Officer and Principal Financial Officer
during 2009, and
* the other 3 most highly compensated executive
officers of the corporation and the bank at
December 31, 2009 whose total compensation
exceeded $100,000.
Page 22 First Keystone Corporation
SUMMARY COMPENSATION TABLE
NAME AND
PRINCIPAL SALARY
POSITION YEAR ($)
________ ____ ______
J. Gerald Bazewicz 2009 215,000
Principal Executive Officer 2008 203,000
2007 193,000
Diane C. A. Rosler 2009 80,000
Chief Financial Officer 2008 69,558
2007 57,681
John G. Gerlach 2009 142,789
President, Pocono Division 2008 275,913
2007 42,052
Matthew P. Prosseda 2009 157,000
Executive Vice President 2008 151,000
2007 145,000
NAME AND STOCK
PRINCIPAL BONUS AWARDS
POSITION ($) ($)
________ _____ ______
J. Gerald Bazewicz --- ---
Principal Executive Officer 24,975 ---
--- ---
Diane C. A. Rosler --- ---
Chief Financial Officer 5,550 ---
--- ---
John G. Gerlach --- ---
President, Pocono Division --- ---
--- ---
Matthew P. Prosseda --- ---
Executive Vice President 13,875 ---
--- ---
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
NAME AND OPTION COMPENSATION
PRINCIPAL AWARDS EARNINGS
POSITION ($) ($)
________ ______ ________
J. Gerald Bazewicz --- ---
Principal Executive Officer 2,884 68,079
96 77,689
Diane C. A. Rosler --- ---
Chief Financial Officer --- ---
--- ---
John G. Gerlach --- ---
President, Pocono Division 2,163 ---
72 ---
Matthew P. Prosseda --- 23,272
Executive Vice President 2,163 21,921
72 13,902
NAME AND ALL OTHER
PRINCIPAL COMPENSATION TOTAL
POSITION ($) ($)
________ ____ ______
J. Gerald Bazewicz 44,400 259,400
Principal Executive Officer 35,900 334,838
36,582 307,367
Diane C. A. Rosler 8,793 88,793
Chief Financial Officer 6,956 82,064
5,910 63,591
John G. Gerlach 34,179 176,968
President, Pocono Division 38,600 316,676
540,280 582,404
Matthew P. Prosseda 17,691 197,963
Executive Vice President 15,100 204,059
14,862 173,836
____________________
Bonus earned in 2008 and paid in 2009.
Option awards represent the compensation expense and financial reporting
value of 2007 grants issued December 27, 2007 and recognized in 2008 for
the named executive officers. There can be no assurance that these values
will ever be realized by the executive in the future, or that the options
will ever be exercised. No option awards were granted in 2009.
Amounts shown for Mr. Bazewicz in 2009 include $19,900 in director fees,
$7,350 in 401(k) matching contribution, and $17,150 401(k) profit sharing
award, in 2008 $15,600 in director fees, $6,090 401(k) matching
contribution and $14,210 401(k) profit sharing award, and 2007 $16,800 in
director fees, $5,790 401(k) matching contribution and $13,992 401(k)
profit sharing award.
Amounts shown for Ms. Rosler in 2009 include $2,638 401(k) matching
contribution and $6,155 401(k) profit sharing award, in 2008 $2,087 401(k)
matching contribution and $4,869 401(k) profit sharing award, and in 2007
$1,730 401(k) matching contribution and $4,180 401(k) profit sharing award.
Amounts shown for Mr. Gerlach in 2009 include $19,900 in director fees,
$4,284 401(k) matching contribution and $9,995 401(k) profit sharing, in
2008 $15,600 in director fees, $6,900 in 401(k) matching contribution and
$16,100 401(k) profit sharing award, and in 2007 $2,400 in director fees,
$3,049 in 401(k) matching contribution, $1,221 401(k) profit sharing award,
and $533,610 for the buyout of his Pocono warrants as provided in the
merger agreement.
Amounts shown for Mr. Prosseda in 2009 include $5,307 401(k) matching
contribution and $12,384 401(k) profit sharing award, in 2008 $4,530 401(k)
matching contribution and $10,570 401(k) profit sharing award, and in 2007
$4,350 401(k) matching contribution and $10,512 401(k) profit sharing
award.
Proxy Statement Page 23
401(K) PLAN
___________
The bank maintains a 401(k) Plan which has a combined tax
qualified savings feature and profit sharing feature. The plan
provides benefits to employees who have completed at least one
year of service and are at least 21 years of age. The plan
agreement provides that the bank will match employee deferrals to
the plan up to 3% of their respective eligible compensations.
Additionally, the bank may make a discretionary profit sharing
contribution annually to the plan. Contributions made by the
bank to the plan are allocated to participants in the same
portions that each participant's compensation bears to the
aggregate compensation of all participants. Each participant in
the plan is 100% vested at all times. Benefits are payable under
the plan upon termination of employment, disability, death, or
retirement.
Of the $554,980 total expenses during 2009, $65,263 was
credited among the individual accounts of the 4 most highly
compensated executive officers of the bank. Of the $65,263, Mr.
Bazewicz was credited with $24,500, Mr. Prosseda with $17,691,
Ms. Rosler with $8,793, and Mr. Gerlach with $14,279. Mr.
Bazewicz has been a member of the plan for 24 years, Mr. Prosseda
for 4 years, Ms. Rosler for 18 years, and Mr. Gerlach for 2
years.
AGGREGATED OPTIONS, GRANTS OR EXERCISES IN 2009 YEAR END OPTION
VALUES
_______________________________________________________________
There were no grants or exercises of stock options by the
named executive officer under the 1998 Stock Incentive Plan.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2009
OPTION AWARDS
_______________________
NUMBER OF SECURITIES
UNDERLYING UNRESTRICTED
OPTIONS (#)
NAME EXERCISABLE
____ ___________
J. Gerald Bazewicz 3,150
Principal Executive Officer 1,050
1,000
Diane C. A. Rosler 412
Chief Financial Officer 787
787
John G. Gerlach 750
President, Pocono Division
Matthew P. Prosseda 525
Executive Vice President 750
OPTION AWARDS
_______________________
NUMBER OF SECURITIES
UNDERLYING UNRESTRICTED
OPTIONS (#)
NAME UNEXERCISABLE
____ _____________
J. Gerald Bazewicz ---
Principal Executive Officer ---
---
Diane C. A. Rosler ---
Chief Financial Officer ---
---
John G. Gerlach ---
President, Pocono Division
Matthew P. Prosseda ---
Executive Vice President ---
OPTION AWARDS
_______________________
EQUITY INCENTIVE
PLAN AWARDS:
NUMBER OF SECURITIES
UNDERLYING UNRESTRICTED
NAME UNEARNED OPTIONS (#)
____ _____________
J. Gerald Bazewicz ---
Principal Executive Officer
Diane C. A. Rosler ---
Chief Financial Officer
John G. Gerlach ---
President, Pocono Division
Matthew P. Prosseda ---
Executive Vice President
OPTION AWARDS
_______________________
OPTION EXERCISE
NAME PRICE ($)
____ _________
J. Gerald Bazewicz 21.11
Principal Executive Officer 20.95
16.75
Diane C. A. Rosler
Chief Financial Officer 10.28
15.08
21.11
John G. Gerlach 16.75
President, Pocono Division
Matthew P. Prosseda 20.95
Executive Vice President 16.75
OPTION AWARDS
_______________________
NAME OPTION EXPIRATION DATE
____ ______________________
J. Gerald Bazewicz 09/23/13
Principal Executive Officer 09/27/15
12/27/17
Diane C. A. Rosler 09/26/10
Chief Financial Officer 09/24/12
09/23/13
John G. Gerlach 12/27/17
President, Pocono Division
Matthew P. Prosseda 09/27/15
Executive Vice President 12/27/17
Page 24 First Keystone Corporation
OPTIONS EXERCISED DURING 2009
There were no options exercised during 2009 by the named
executive officers under the 1998 Stock Incentive Plan.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
_____________________________________
The corporation maintains a Supplemental Employee Retirement
Plan ("SERP") covering 2 of the bank's executive officers, J.
Gerald Bazewicz and Matthew P. Prosseda. The SERP, which is a
salary continuation agreement, provides that if the executive
officer continues to serve as an officer of the bank until a
stated retirement age of 60 years for Bazewicz and age 62 for
Prosseda, the bank will pay 240 guaranteed consecutive monthly
payments commencing on the first day of the month following the
officer's 60th or 62nd birthday and the termination of employment
in the amounts indicated below.
The established retirement benefit under the SERP for Mr.
Bazewicz and Mr. Prosseda will be $3,750 per month and $4,167 per
month, respectively, and is not subject to change. If the
executive officer attains their stated retirement age, but dies
before receiving all of the guaranteed monthly payments, then the
bank will make the remaining payments to the officer's
beneficiary. In the event the officer dies while serving as an
officer, prior to their stated retirement age, the bank will
remit the guaranteed monthly payment to the officer's beneficiary
commencing the month following the executive's death. In the
event of a change of control and the termination of the officer's
employment, the guaranteed monthly payments will commence the
month following the executive's termination of service.
Generally, no benefit will be paid if the executive officer
voluntarily terminates employment prior to attaining the stated
retirement age or is terminated for cause.
The SERP allows the executive officers to achieve a
retirement income percentage that is more consistent with their
experience and years of service to the bank. The plan objective
is to provide the executive officers with a final wage
replacement ratio of approximately 75% of projected final salary
including projected benefits from the bank 401(k), social
security, and salary continuation provided through the agreement.
PENSION BENEFITS
NUMBER
OF YEARS
PLAN CREDITED
NAME NAME SERVICE (#)
____ ____ ___________
J. Gerald Bazewicz SERP 13
Chief Executive Officer
Matthew P. Prosseda SERP 3
Executive Vice President
PERCENT PAYMENTS
VALUE OF DURING
ACCUMULATED LAST FISCAL
NAME BENEFIT ($) YEAR ($)
____ ___________ ________
J. Gerald Bazewicz 547,646 ---
Chief Executive Officer
Matthew P. Prosseda 59,095 ---
Executive Vice President
POST TERMINATION BENEFITS
_________________________
JOHN G. GERLACH
The following tables and narratives set forth the potential
post termination benefits payable to Mr. Gerlach under the 1998
Stock Incentive Plan.
Proxy Statement Page 25
TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. If Mr.
Gerlach's employment is terminated for "Cause" or voluntarily
terminates his employment, First Keystone Corporation shall be
obligated to make any further payments.
Termination Voluntary
for Cause Termination
($) ($)
_____ __________
1998 Stock Incentive Plan 188 188
TERMINATION WITHOUT CAUSE OR FOR GOOD REASON- BEFORE A
CHANGE IN CONTROL. If Mr. Gerlach's employment is terminated
"Without Cause" or "Good Reason", he would be entitled to receive
the following payments.
Termination
Without
Cause ($)
___________
1998 Stock Incentive Plan 188
DEATH OR DISABILITY. In the event of a termination of
employment as a result of Mr. Gerlach's death or disability, the
Executive's dependents, beneficiaries or estate, as the case may
be, will receive benefits as they may be entitled under the terms
of First Keystone Corporation's benefit programs, which includes
Life Insurance proceeds of twice base salary under the Death
Benefit Agreement. Mr. Gerlach's estate will receive the
following payments under the employment agreement.
Death Disability
($) ($)
_____ __________
1998 Stock Incentive Plan 188 188
Life Insurance Proceeds 285,578 ---
TERMINATION UPON OR AFTER A CHANGE IN CONTROL. If a "Change
in Control" occurs, Mr. Gerlach shall be entitled to the
following payments.
Change of
Control ($)
___________
1998 Stock Incentive Plan 188
Page 26 First Keystone Corporation
J. GERALD BAZEWICZ
The Board of Directors may at its sole discretion award Mr.
Bazewicz a pro rata amount in the event of his retirement, death
or disability, under the Management Incentive Compensation Plan.
The following tables and narratives set forth the potential
post termination benefits payable to Mr. Bazewicz under the 1998
Stock Incentive Plan and the Supplemental Employee Retirement
Plan in a lump sum or over a period time, upon certain
termination events assuming that the Executive's employment was
terminated as of December 31, 2009.
TERMINATED FOR CAUSE. If Mr. Bazewicz's employment is
terminated for "Cause" as defined in the Supplemental Employee
Retirement Plan, First Keystone Corporation shall not thereafter
be obligated to make any further payments.
Termination
for Cause ($)
___________
1998 Stock Incentive Plan 250
Supplemental Employee Retirement Plan 0
TERMINATION WITHOUT CAUSE/VOLUNTARY TERMINATION OR FOR GOOD
REASON- BEFORE A CHANGE OF CONTROL. If Mr. Bazewicz's employment
is terminated "Without Cause" or "Good Reason," he would be
entitled to receive the following payments.
Voluntary
Termination/
Termination
Without Cause/
Good Reason($)
___________
1998 Stock Incentive Plan 250
Supplemental Employee Retirement Plan 547,646
Executive shall be entitled to payment since he has reached
the normal retirement age of "60" as outlined in the SERP.
Benefit would be paid in guaranteed monthly payments of $3,750
per month for 240 months commencing the month following the
executive's termination of service.
DEATH OR DISABILITY. In the event of a termination of
employment as a result of Mr. Bazewicz's death or disability, his
dependents, beneficiaries or estate, as the case may be, will
receive benefits as they may be entitled under the terms of First
Keystone Corporation's benefit programs, which includes Life
Insurance proceeds of twice base salary under the Death Benefit
Agreement and as follows.
Proxy Statement Page 27
Death Disability
($) ($)
_____ __________
1998 Stock Incentive Plan 250 250
Supplemental Employee
Retirement Plan 547,646 547,646
Life Insurance Proceeds 430,000 ---
The SERP benefit under death would be paid to the
beneficiary in monthly payments of $3,750 for 240 months
commencing following the executive's death. The SERP benefit
under disability shall be paid in a lump sum within 60 days after
the executive's termination of employment.
TERMINATION UPON OR AFTER A CHANGE IN CONTROL. If a "Change
of Control" as defined in the Supplemental Executive Retirement
Agreement occurs, Mr. Bazewicz shall be entitled to the following
payments.
Change of
Control ($)
___________
1998 Stock Incentive Plan 250
Supplemental Employee Retirement Plan 547,646
The SERP benefit under a change of control would be paid in
monthly payments of $3,750 for 240 months commencing with the
month following the executive's termination of service.
MATTHEW P. PROSSEDA
The Board of Directors may at its sole discretion award Mr.
Prosseda a pro-rata amount in the event of his retirement, death
or disability under the Management Incentive Compensation Plan.
The following tables and narratives set forth the potential
post termination benefits payable to Mr. Prosseda under the 1998
Stock Incentive Plan and the Supplemental Employee Retirement
Plan in a lump sum or over a period of time upon certain
termination events assuming that the executive's employment was
terminated as of December 31, 2009.
TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. If Mr.
Prosseda's employment is terminated for "Cause" as defined in the
Supplemental Employee Retirement Plan or he voluntarily
terminates his employment, First Keystone Corporation shall not
thereafter be obligated to make any further payments.
Page 28 First Keystone Corporation
Termination
for Cause ($)
___________
1998 Stock Incentive Plan 188
Supplemental Employee Retirement Plan 0
TERMINATION WITHOUT CAUSE OR FOR GOOD REASON- BEFORE A
CHANGE OF CONTROL. If Mr. Prosseda's employment is terminated
"Without Cause" or "Good Reason," he would be entitled to receive
the following payments.
Termination
Without
Cause ($)
___________
1998 Stock Incentive Plan 188
Supplemental Employee Retirement Plan 59,095
SERP benefit would be paid in 12 equal payments of $974 for
240 months commencing the month following the executive's
termination of service.
DEATH OR DISABILITY. In the event of a termination of
employment as a result of Mr. Prosseda's death or disability, his
dependents, beneficiaries or estate, as the case may be, will
receive benefits as they may be entitled under the terms of First
Keystone Corporation's benefit programs, which includes Life
Insurance proceeds of twice base salary under the Death Benefit
Agreement and as follows.
Death Disability
($) ($)
_____ __________
1998 Stock Incentive Plan 188 188
Supplemental Employee 584,494 59,095
Retirement Plan
Life Insurance Proceeds 314,000 ---
SERP benefit under death would be paid to the beneficiary in
monthly payments of $4,167 for 240 months commencing the month
following the executive's death. The SERP benefit under
disability shall be paid in a lump sum 60 days after the
executive's termination of employment.
TERMINATION UPON OR AFTER A CHANGE IN CONTROL. If a "Change
of Control" as defined in the Supplemental Executive Retirement
Agreement occurs, Mr. Prosseda shall be entitled to the following
payments.
Proxy Statement Page 29
Change of
Control ($)
___________
1998 Stock Incentive Plan 188
Supplemental Employee Retirement Plan 584,494
The SERP benefit under a change of control would be paid in
monthly payments of $4,167 for 240 months commencing the month
following the executive's termination of service.
DIANE C. A. ROSLER
The Board of Directors may at its sole discretion award Ms.
Rosler a pro rata amount in the event of her retirement, death or
disability under the Management Incentive Compensation Plan.
The following tables and narratives set forth the potential
post termination benefits payable to Ms. Rosler under the 1998
Stock Incentive Plan as of December 31, 2009.
TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. If Ms.
Rosler's employment is terminated for "Cause" or she voluntarily
terminates her employment, First Keystone Corporation shall be
obligated to make the following payments.
Termination Voluntary
for Cause Termination
($) ($)
_____ __________
1998 Stock Incentive Plan 4,270 4,270
TERMINATION WITHOUT CAUSE OR FOR GOOD REASON- BEFORE A
CHANGE OF CONTROL. If Ms. Rosler's employment is terminated
"Without Cause" or "Good Reason," she would be entitled to
receive the following payments.
Termination
Without
Cause ($)
___________
1998 Stock Incentive Plan 4,270
DEATH OR DISABILITY. In the event of a termination of
employment as a result of Ms. Rosler's death or disability, her
dependents, beneficiaries or estate, as the case may be, will
receive benefits as they may be entitled under the terms of First
Keystone Corporation's benefit programs, which includes Life
Insurance proceeds of twice base salary under the Death Benefit
Agreement and as follows.
Page 30 First Keystone Corporation
Death Disability
($) ($)
_____ __________
1998 Stock Incentive Plan 4,270 4,270
Life Insurance Proceeds 160,000 ---
TERMINATION UPON OR AFTER A CHANGE IN CONTROL. If a "Change
of Control" occurs, Ms. Rosler shall be entitled to the following
payments.
Change of
Control ($)
___________
1998 Stock Incentive Plan 4,270
RELATED PERSON TRANSACTIONS
___________________________
Related person transactions are subject to approval by the
Board of Directors.
In deciding whether to approve a related person transaction
the following factors may be considered:
* information about the goods or services proposed to be or
being provided by or to the related party or the nature
of the transactions;
* the nature of the transactions and the costs to be
incurred by the Corporation or payments to the
Corporation;
* an analysis of the costs and benefits associated with the
transaction and a comparison of comparable or alternative
goods or services that are available to the Corporation
from unrelated partes; and
* the business advantage the Corporation would gain by
engaging in the transaction.
To receive approval, the related person transaction must be
on terms that are fair and reasonable to the Corporation, and
that are as favorable to the Corporation as would be available
from non related entities in comparable transactions.
Other than described below, there have been no material
transactions between the corporation or the bank, nor any
material transactions proposed, with any director or executive
officer of the corporation or the bank, or any associate of these
persons. The law firm Bull, Bull & Knecht, LLP, of which
Directors Robert E. Bull and Robert A. Bull, are partners,
provided routine legal services to the bank according to the
firm's normal fee schedule and billing rates, and the bank
intends to continue to engage the firm's services in the future.
The bank paid total fees of $147,288 to the law firm during 2009.
In addition, the corporation and the bank have engaged in and
intend to continue to engage in banking and financial
transactions in the ordinary course of business with directors
and officers of the corporation and the bank and their associates
on comparable terms and with similar interest rates as those
prevailing from time to time for other customers of the
corporation and the bank.
Proxy Statement Page 31
Total loans outstanding and commitments from the corporation
and the bank at December 31, 2009, to the corporation's and the
bank's executive officers and directors as a group and members of
their immediate families and companies in which they had an
ownership interest of 10% or more was $7,102,864, or
approximately 9.6% the total equity capital. Loans to such
persons were made in the ordinary course of business, were made
on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons not related to the lender, and
did not involve more than the normal risk of collectibility or
present other unfavorable features. All loans are current and
being paid as agreed. The largest aggregate amount of
indebtedness outstanding at any time during fiscal year 2009 to
officers and directors of the corporation and the bank, and their
affiliates as a group was $7,502,110. The aggregate amount of
outstanding indebtedness as of the latest practicable date, March
1, 2010, to the above described group was $6,733,072.
PRINCIPAL OFFICERS OF THE BANK AND THE CORPORATION
The following table presents selected information as of
March 5, 2010, about the executive officers of the bank and
corporation, each of whom is elected by the Board of Directors
and each of whom holds office at the discretion of the Board of
Directors:
Age as of
March 5, Office and Position
Name 2010 with the Bank
____ _______ ___________________
Robert E. Bull 87 Chairman of the Board
since 1981
J. Gerald Bazewicz 61 President and CEO
since 1987
John E. Arndt 48 Secretary
since 2006
Matthew P. Prosseda 48 Executive Vice
President and
Assistant Secretary
since 2005
Diane C. A. Rosler 45 Chief Financial
Officer
since 2007
Age as of
March 5, Office and Position
Name 2010 with the Corporation
____ ____ ___________________
Robert E. Bull 87 Chairman of the Board
since 1983
J. Gerald Bazewicz 61 President and CEO
since 1987
John E. Arndt 48 Secretary
since 2006
Matthew P. Prosseda 48 Treasurer and
Assistant Secretary
since 2005
Diane C. A. Rosler 45 Chief Financial
Officer
since 2007
____________________
Mr. Prosseda is the Director of Lending. Prior to his employment with the
Bank in March 2005, Mr. Prosseda served as Executive Vice President and
Director of Lending at Citizens & Northern Bank.
Page 32 First Keystone Corporation
LEGAL PROCEEDINGS
In the opinion of the management of First Keystone Corporation and its
banking subsidiary, there are no proceedings pending to which the
corporation or its banking subsidiary is a party to, or which their
property is subject, which, if determined adversely to the corporation or
the bank, would have a material effect on their undivided profits or
financial condition. There are no proceedings pending other than routine
litigation incident to the business of the corporation and its banking
subsidiary. In addition, to the Board's knowledge, no government
authorities have initiated, threatened to initiate, or contemplated any
material proceedings against First Keystone Corporation or its banking
subsidiary.
PROPOSAL NO. 2: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed J. H. Williams & Co., LLP,
Certified Public Accountants, located at 270 Pierce Street, Kingston,
Pennsylvania 18704, as the corporation's independent auditors for its 2010
fiscal year. The Board proposes that shareholders ratify this selection.
J. H. Williams & Co., LLP, has advised the corporation that none of its
members has any financial interest in the corporation. Ratification of J.
H. Williams & Co., LLP, will require the affirmative vote of a majority of
the votes cast in person or by proxy at the Annual Meeting by shareholders
entitled to vote. J. H. Williams & Co., LLP served as the corporation's
independent auditors for the 2009 fiscal year, assisted the corporation and
the bank with preparation of their federal and state tax returns, and
provided assistance in connection with regulatory matters, charging the
bank for services at its customary hourly billing rates. The corporation's
and the bank's Board of Directors approved these non-audit services after
due consideration of the accountants' objectivity and after finding them to
be wholly independent.
Representatives of J. H. Williams & Co., LLP, will attend the Annual
Meeting of Shareholders, will have the opportunity to make a statement and
are expected to be available to respond to any questions. In the event
that the shareholders do not ratify the selection of J. H. Williams & Co,
LLP, as the corporation's independent auditors for the 2010 fiscal year,
another accounting firm may be chosen to provide independent audit services
for the 2010 fiscal year.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of J. H. Williams & Co., LLP, as the
independent auditors for the corporation for the year ending December 31,
2010.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and shareholders who own more
than 10% of the Corporation's outstanding equity stock to file initial
reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Corporation with the Securities and
Exchange Commission. Based solely on its review of copies of Section 16(a)
forms received by it, or written representations from reporting persons
that no Forms 5 were required for those persons, the corporation believes
that during the period January 1, 2009 through December 31, 2009, its
officers, directors and reporting shareholders were in compliance with all
filing requirements applicable to them.
Proxy Statement Page 33
AVAILABILITY OF FORM 10-K
The Corporation will file with the SEC an Annual Report on Form 10K
for 2009. The Corporation will provide a copy of that report on written
request without charge to any person. Please address your request to
Cheryl Wynings, Investor Relations, First Keystone Corporation, 111 West
Front Street, Berwick, Pennsylvania 18603, telephone: (570) 752-3671.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented
for consideration other than the matters described in the accompanying
Notice of Annual Meeting of Shareholders, but if any matters are properly
presented, the persons named in the accompanying proxy intend to vote on
the matters as they determine to be in the best interest of the
corporation.
Page 34 First Keystone Corporation