SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. [ ] )
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 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):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(1)(3)
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
[X] No Fee Required
1) Title of each class of securities to which transaction
applies:
_______________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration No.:
3) Filing party:
4) Date filed:
_____________
*Set forth the amount on which the filing fee is calculated and
state how it was determined.
FIRST KEYSTONE CORPORATION
__________________________________________________________________
111 West Front Street
Berwick, Pennsylvania 18603
March 26, 2002
Dear Fellow Shareholders of First Keystone Corporation:
It is my pleasure to invite you to attend the 2002 Annual
Meeting of Shareholders of First Keystone Corporation to be held
on Tuesday, April 16, 2002, at 10:00 a.m., Eastern Daylight Time.
The Annual Meeting this year will be held at the main office of
The First National Bank of Berwick, 111 West Front 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 3 Class C 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, 2002.
At the meeting, members of the corporation's management will
review the corporation's operations during the past year and 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 the accompanying proxy form as soon as
possible, in the postage-prepaid envelope. If you do attend the
meeting and wish to vote in person, you must give written notice
of your intentions to the Secretary of the corporation so that any
ballot you submit at the meeting will supersede your prior 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
FIRST KEYSTONE CORPORATION
_______________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 2002
_______________________________________
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, April 16, 2002, at the
main office of The First National Bank of Berwick, 111 West Front
Street, Berwick, Pennsylvania 18603, for the following purposes:
1. To elect 3 Class C 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, 2002; 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 by-laws 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 12, 2002, and only
those shareholders may vote at the Annual Meeting and any
adjournment.
A copy of the corporation's Annual Report for the fiscal year
ended December 31, 2001, is being mailed with this Notice. Copies
of the corporation's Annual Report for the 2000 fiscal year may be
obtained at no cost by contacting J. Gerald Bazewicz, President,
First Keystone Corporation, 111 West Front Street, Berwick,
Pennsylvania 18603, telephone: (570) 752-3671.
Whether or not you expect to attend the Annual Meeting in
person, you are requested to complete, sign, date, and promptly
return the enclosed proxy form in the accompanying postage-prepaid
envelope. 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 the enclosed proxy does not affect
your right to vote in person if you attend the meeting and give
written notice to the Secretary of the corporation.
By Order of the Board of Directors,
/s/ J. Gerald Bazewicz
J. Gerald Bazewicz, President
Berwick, Pennsylvania
March 26, 2002
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF FIRST KEYSTONE CORPORATION TO BE HELD ON APRIL 16, 2002
Table of Contents
________________
Page
General Information 3
Introduction, Date, Time and Place of Annual
Meeting 3
Voting Procedures 3
Solicitation and Voting of Proxies 3
Revocability of Proxy 3
Voting Securities, Record Date and Quorum 4
Vote Required for Approval 4
Principal Beneficial Owners of the Corporation's
Stock 5
Principal Owners 5
Proposal No. 1: Election of Directors 6
Information as to Nominees and Directors 7
Beneficial Ownership by Officers, Directors
and Nominees 8
Committees of the Board of Directors 9
Procedures for Nominating Directors 11
Compensation of Directors 11
Report of the Audit Committee 11
Board Compensation Committee Report on
Executive Compensation 13
Base Salary 13
Cash Bonuses 14
Long-Term Incentives 14
Compensation Committee Interlocks and Insider
Participation 15
Executive Compensation 15
Aggregated Option Exercises in 2001 and 2001
Year-End Options Values 16
401(k) Plan 17
Supplemental Employee Retirement Plan 17
Performance Graph 18
Related Party Transactions 19
Principal Officers of the Bank 20
Legal Proceedings 21
Proposal No. 2: Ratification of Independent Auditors 21
Shareholder Proposals 22
Other Matters 22
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF FIRST KEYSTONE CORPORATION TO BE HELD ON APRIL 16, 2002
GENERAL
Introduction, Date, Time and Place of Annual Meeting
____________________________________________________
First Keystone Corporation, a Pennsylvania business
corporation and registered bank holding company, is furnishing
this Proxy Statement in connection with the solicitation by its
Board of Directors of proxies to be voted at the Annual Meeting of
Shareholders of the corporation and at any adjournment or
postponement of the Annual Meeting. The corporation will hold the
meeting on Tuesday, April 16, 2002, at 10:00 a.m., Eastern
Daylight Time, at the main office of The First National Bank of
Berwick, 111 West Front Street, Berwick, Pennsylvania 18603.
The principal executive office of the corporation is located
at The First National Bank of Berwick, 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
__________________________________
This Proxy Statement and the enclosed proxy form are first
being sent to shareholders of the corporation on or about March
26, 2002.
By properly completing and returning the accompanying proxy,
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 C Director
named below, 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, 2002.
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the Annual Meeting and vote
in person, after giving written notice to the Secretary of the
corporation of this.
The corporation will pay the cost of preparing, assembling,
printing, mailing and soliciting proxies, and any additional
material which 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 of stock held of record by these persons and
will reimburse them for their reasonable forwarding expenses.
Revocability of Proxy
_____________________
A shareholder who returns a proxy may revoke the proxy at any
time before it is voted only:
* By giving written notice of revocation to John L. Coates,
Secretary of First Keystone Corporation, at 111 West Front
Street, Berwick, Pennsylvania, 18603;
Proxy Statement Page 3
* By executing a later-dated proxy and giving written notice
of this fact to the Secretary of the corporation; or
* By attending the Annual Meeting and voting in person after
giving written notice to the Secretary of the corporation,
in person or at the above address.
Voting Securities, Record Date and Quorum
_________________________________________
At the close of business on March 12, 2002, the corporation
had outstanding 2,833,727 shares of common stock, par value $2.00
per share, the only issued and outstanding class of stock. The
corporation also had 100,000 shares held in treasury as issued but
not outstanding shares as of that date. The corporation's
Articles of Incorporation authorize the issuance of up to
10,000,000 shares of common stock, par value of $2.00 per share.
The corporation also has 500,000 shares of preferred stock, par
value $10.00 per share, authorized. As of March 12, 2002, no
shares of preferred stock were issued.
Only shareholders of record as of the close of business on
March 12, 2002, 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 outstanding 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 which all shareholders are entitled to cast will constitute
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 3 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
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
________________
The following table sets forth, as of March 12, 2002, 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 336,184 11.86%
First National Bank of
Berwick Trust Department
111 West Front Street
Berwick, PA 18603
Robert E. Bull 170,095 6.00%
323 West Fourth Street
Nescopeck, PA 18635
Robert J. Wise 159,582 5.63%
115 West Third Street
Berwick, PA 18603
Frederick E. Crispin, Jr. 147,717 5.21%
3 Cedarbrook Terrace
Princeton, NJ 08540
____________________
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
12, 2002. Beneficial ownership may be disclaimed as to certain of the
securities.
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
276,826 shares and as fiduciary with shared voting and dispositive power
over 59,358 shares. Total does not include 53,010 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 below and for the ratification of J. H. Williams & Co., LLP,
independent auditors of the corporation.
Includes 115,057 shares held individually by Mr. Bull, 2,036 shares held by
Bull, Bull & Knecht, LLP, a law firm of which Mr. Bull is a partner, 2,407
held by Bull, Bull & Knecht, LLP Profit Sharing Trust, and 50,595 shares
held by the Sara E. Bull Trust of which Mr. Bull is the trustee.
Includes 139,821 shares held individually by Mr. Wise and 19,761 shares
held jointly with his spouse.
Proxy Statement Page 5
Includes 15,972 shares held individually by Mr. Crispin, 7,986 shares held
individually by his spouse and 123,759 shares held by the Frederick E.
Crispin Sr. Trust in which Mr. Crispin is the trustee and has sole voting
authority.
PROPOSAL NO. 1: ELECTION OF CLASS C DIRECTORS
The bylaws of the corporation 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 may serve
as director with the exception of Messrs. Beyer, Bull, Crispin,
and Wise. 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 2002 Annual Meeting of Shareholders, 3 Class C 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 C
Directors to serve as Class C Directors for the next three-year
term of office. The nominees for reelection this year are as
follows:
* Don E. Bower, director since 2001;
* John L. Coates, director since 1987; and
* Dudley P. Cooley, director since 1987
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 3 nominees. If any nominee
should become unavailable for any reason, proxies will be voted in
favor of a substitute nominee 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 Articles of Incorporation of the corporation 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.
Page 6 First Keystone Corporation
BOARD OF DIRECTORS AND MANAGEMENT
Governance
__________
The Board of Directors of the corporation 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, The
First National Bank of Berwick, upon election by the corporation.
Information as to Directors and Nominees
________________________________________
The following biographics contain selected information about
the directors and nominees for director. The information is
accurate as of March 12, 2002, and includes each person's business
experience for at least the past 5 years.
CURRENT CLASS C DIRECTORS WHOSE TERM EXPIRES IN 2002
AND NOMINEES FOR CLASS C DIRECTOR WHOSE TERM WILL EXPIRE IN 2005
Don E. Bower Mr. Bower (age 53) 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.
John L. Coates Mr. Coates (age 65) is the President
and owner of Tri-County Hardware,
Inc. He has served as the Secretary
of the corporation and the bank since
1995, and as a director of the
corporation and the bank since 1987.
Dudley P. Cooley Mr. Cooley (age 63), is a financial
consultant and the former controller
for Wise Foods, a division of Borden,
Inc. He has been a director of the
corporation and the bank since 1987.
CLASS A DIRECTORS WHOSE TERM EXPIRES IN 2003
Budd L. Beyer Mr. Beyer (age 74), now retired, was
an owner and a principal shareholder
of Sunshine Textile Services, Inc., a
dry cleaning service located in
Bloomsburg, Pennsylvania. Mr. Beyer
has served as a director of the
corporation since 1983 and of the
bank since 1976.
Frederick E. Crispin, Jr. Mr. Crispin (age 70) is a retired
business and financial consultant.
He has served as a director of the
corporation since 1983 and of the
bank since 1964.
Jerome F. Fabian Mr. Fabian (age 59) 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.
Robert J. Wise Mr. Wise (age 72), now retired, has
served as a director of the
corporation since 1983 and of the
bank since 1967. Mr. Wise is also
the Vice Chairman of the Board of the
corporation and the bank, a position
he has held since 1996.
Proxy Statement Page 7
CLASS B DIRECTORS WHOSE TERM EXPIRES IN 2004
John E. Arndt Mr. Arndt (age 40) 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.
J. Gerald Bazewicz Mr. Bazewicz (age 53) 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.
Robert E. Bull Mr. Bull (age 79), 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.
Beneficial Ownership by Officers, Directors and Nominees
________________________________________________________
The following table sets forth as of March 12, 2002, the
amount and percentage of the outstanding common stock of the
corporation 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
____ _____________ _______
Nominees for Class C Directors
(to serve until 2005)
And Class C Director
____________________
Don E. Bower 10,444 --
John L. Coates 7,029 --
Dudley P. Cooley 4,293 --
Class A Director
(to serve until 2003)
____________________
Budd L. Beyer 38,432 1.36%
Frederick E. Crispin, Jr. 147,717 5.21%
Jerome F. Fabian 15,763 --
Robert J. Wise 159,582 5.63%
Class B Director
(to serve until 2004)
____________________
John E. Arndt 4,841 --
J. Gerald Bazewicz 20,647 --
Robert E. Bull 170,095 6.00%
Other Named Executive Officer
_____________________________
David R. Saracino 7,188 --
Leslie W. Bodle 7,421 --
All Directors and Executive 593,452 20.94%
Officers as a Group
(12 Persons in Total)
____________________
Page 8 First Keystone Corporation
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
12, 2002. Beneficial ownership may be disclaimed as to certain of the
securities.
Information furnished by the directors and the corporation.
Less than 1% unless otherwise indicated.
Includes 5,433 shares held individually by Mr. Coates and 1,596 shares held
jointly with his spouse.
Includes 15,972 shares held individually by Mr. Crispin, 7,986 shares held
individually by his spouse and 123,759 shares held by the Frederick E.
Crispin Sr. Trust in which Mr. Crispin is the trustee and has sole voting
authority.
Includes 765 shares held individually by Mr. Fabian, 6,572 shares by the
Jerome F. Fabian Trust Under Agreement for which Mr. Fabian exercises
dispositive power, 7,435 shares held jointly with his spouse, and 991
shares held by Tile Distributors of America, Inc. of which Mr. Fabian is
sole owner.
Includes 139,821 shares held individually by Mr. Wise and 19,761 shares
held jointly with his spouse.
Includes 3,815 shares held individually by Mr. Arndt, 572 shares held
individually by his spouse, and 454 shares held by Arndt Insurance Profit
Sharing.
Includes 7,745 shares held individually by Mr. Bazewicz, 3,384 shares held
in his bank 401K plan, 2,051 shares held jointly with his spouse, 617
shares held individually by his spouse, 660 shares held jointly with his
children, and 190 shares held as custodian for the benefit of his children
and 6,000 shares which may be purchased upon the exercise of stock options.
Includes 115,057 shares held individually by Mr. Bull, 2,036 shares held by
Bull, Bull & Knecht, LLP, a law firm of which Mr. Bull is a partner, 2,407
held by Bull, Bull & Knecht, LLP Profit Sharing Trust, and 50,595 shares
held by the Sara E. Bull Trust of which Mr. Bull is the trustee.
Includes 2,545 shares held individually by Mr. Saracino, 1,643 shares held
in his bank 401K plan, and 3,000 shares which may be purchased upon the
exercise of stock options.
Includes 1,000 shares held individually by Mr. Bodle, 915 shares held
jointly with his spouse, 1,000 shares held jointly with his child, 1,506
shares held in his bank 401K plan, and 3,000 shares which may be purchased
upon the exercise of stock options.
COMMITTEES OF THE BOARD OF DIRECTORS
The corporation's board of directors has, at present, no standing
committees. During 2001, the bank's board of directors maintained standing
committees: trust, asset-liability management, marketing, loan administra-
tion, audit, human resources, building and executive. The composition of
these committees is described below:
Proxy Statement Page 9
Asset/
Liability
Name Trust Management Marketing
____ _____ __________ ________
John E. Arndt X X*
J. Gerald Bazewicz X X X
Budd L. Beyer X
Robert E. Bull X
John L. Coates X X
Dudley P. Cooley X X
Frederick E. Crispin, Jr. X X*
Jerome F. Fabian X X
Don E. Bower
Robert J. Wise X* X
Number of Meetings
Held in 2001 12 4 3
Loan Human
Name Administration Audit Resources
____ _____________ _____ ________
John E. Arndt
J. Gerald Bazewicz X X
Budd L. Beyer X X*
Robert E. Bull X X X
John L. Coates X X* X
Dudley P. Cooley X* X X
Frederick E. Crispin, Jr.
Jerome F. Fabian X X X
Don E. Bower
Robert J. Wise
Number of Meetings
Held in 2001 4 4 1
Name Executive Building
____ _________ ________
John E. Arndt X
J. Gerald Bazewicz X X
Budd L. Beyer X
Robert E. Bull X* X
John L. Coates X X
Dudley P. Cooley
Frederick E. Crispin, Jr. X
Jerome F. Fabian
Don E. Bower
Robert J. Wise X X
Number of Meetings
Held in 2001 1 0
*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.
Audit Committee - This committee recommends the appointment
of the independent certified public accountant to examine the
affairs of the bank. Also, the committee reviews findings of the
auditor and ensures an independent, effective audit function.
Human Resources Committee - This committee helps ensure
that a sound human resources management system is developed and
maintained. This committee also acts as the Compensation
Committee for non-executive officers and employees. The Board of
Directors determines compensation for 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.
Building Committee - This committee makes recommendations
to the Board relating to the bank's physical assets, including
both current and proposed physical assets.
Page 10 First Keystone Corporation
Board Meetings and Attendance
_____________________________
The members of the Board of Directors of the corporation also
serve as members of the Board of Directors of The First National
Bank of Berwick. During 2001, the bank's Board of Directors held
25 meetings, and the corporation's Board of Directors held 9
meetings. Each of the Directors attended at least 75% of the
combined total number of meetings of the corporation's and the
bank's Boards of Directors and the committees of which he is a
member, except Robert J. Wise.
Procedures for Nominating Directors
___________________________________
The corporation's Board of Directors nominates individuals
for the position of 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 nominate any candidate for election to the Board of
Directors must notify the Secretary of the corporation in writing
not less than 45 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. You may obtain a
copy of the corporation's bylaws by writing to John L. Coates,
Secretary, First Keystone Corporation, 111 West Front Street,
Berwick, Pennsylvania 18603.
Compensation of Directors
_________________________
During 2001, each member of the corporation's Board of
Directors received $450 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 $450 for each directors' meeting
attended. Nonemployee directors received a $4,000 retainer and
$225 for each committee meeting attended. All directors received
a bonus of $1,000. In addition, Chairman Bull received an annual
stipend of $1,000, and Vice Chairman Wise and Secretary Coates
each received an annual stipend of $750. In the aggregate, the
Board of Directors received $177,800 for all Board of Directors'
meetings and committee meetings attended in 2001, including all
fees, bonuses, and stipends paid to all directors in 2001.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors developed and
updated the charter for the Committee, which was approved by the
Board of Directors on October 10, 2000. The Audit Committee's
primary responsibilities fall into three categories:
* first, the Committee is charged with monitoring the
preparation of quarterly and annual financial reports by
the corporation's management, including discussions with
management and the corporation's outside auditors about
draft annual financial statements and key accounting and
reporting matters;
* second, the Committee is responsible for matters relating
to the relationship between the company and its outside
auditors, including recommending their appointment or
removal, reviewing the scope of their audit services and
related fees, as well as any other services being
provided to the corporation, and determining whether the
outside auditors are independent (based in part on the
annual letter provided to the corporation pursuant to
Independence Standards Board Standard No. 1); and
Proxy Statement Page 11
* third, the Committee oversees management's implementation
of effective systems of internal controls and review of
the activities and recommendations of the corporation's
auditing program.
The Committee has implemented procedures to ensure that
during the course of each fiscal year it devotes the attention
that it deems necessary or appropriate to each of the matters
assigned to it under the committee's charter.
In overseeing the preparation of the corporation's financial
statements, the Committee met with both management and the
corporation's outside auditors to review and discuss all financial
statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all
financial statements were prepared in accordance with generally
accepted accounting principals, and the Committee discussed the
statements with both management and the outside auditors. The
Committee's review included discussion with the outside auditors
of matters required to be discussed pursuant to Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
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 the Independence
Standards Board No. 1 (Independence Discussions with Audit
Committees).
Aggregate fees billed to the corporation and the bank by J.
H. Williams & Co., LLP for services rendered during the year ended
December 31, 2001, were as follows:
Audit fees - J. H. Williams & Co., LLP billed the
corporation in 2001 for services
rendered for the audit of the
corporation's annual financial
statements for the year ended
December 31, 2001, and the reviews
of the financial statements included
in the corporation's reports on SEC
Form 10Q for the quarters ended
March 31, June 30, and
September 30, 2001 $59,648.00
Financial Information Systems Design
and Implementation Fees None
All other fees - J. H. Williams & Co., LLP
billed the corporation in
2001 for other services
rendered. These other
services were for performance
of agreed upon procedures
with respect to the Trust and
Commercial Banking Departments
of the bank and Tax Return
preparation services $40,591.00
Based upon all of the reviews and discussions described
above, the Committee recommended to the Board of Directors that
the audited financial statements for the year ended December 31,
2001, be included in the corporation's Annual Report on Form 10-K
for the 2001 fiscal year end filed with the Securities and
Exchange Commission.
The Audit Committee is comprised of 4 directors, all of whom
are considered "independent" as defined by the National
Association of Securities Dealers (NASD) listing standards. The
Board of Directors has determined that no member of the Committee
has a relationship with the corporation that may interfere with
his independence from the corporation or its management.
The foregoing report has been furnished by the current
members of the Audit Committee.
Page 12 First Keystone Corporation
MEMBERS OF THE AUDIT COMMITTEE
John L. Coates, Chairman
Robert E. Bull
Dudley P. Cooley
Jerome F. Fabian
..
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the corporation's officers and directors, and
persons who own more than 10% of the registered class of the
corporation's equity securities, to file reports of ownership of
the corporation's common stock and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors
and greater than 10% shareholders are required by SEC regulation
to furnish the corporation with copies of all Section 16(a) forms
they file.
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, 2001, through December
31, 2001, its officers, directors and reporting shareholders were
in compliance with all filing requirements applicable to them.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The basic mission of the corporation's executive compensation
policy is to provide executives of First Keystone Corporation's
subsidiary, The First National Bank of Berwick, with a competitive
compensation package that attracts and retains qualified
executives while placing a portion of total pay at risk. 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 guidance from the Human Resources Committee. The
four components of the total compensation package are:
* Base salary
* Regular employee bonus
* Senior management bonus
* Long-term incentives
Base Salary
___________
The Board of Directors determines compensation for executive
officers of The First National Bank of Berwick with guidance from
the Human Resources Committee. 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, and
salary history. For the base salary paid to the Chief Executive
Officer, the Board of Directors, with Mr. Bazewicz not being
present, considers his performance level, the results of
management decisions made by him, and the earnings of the
organization. No particular weight is assigned to any of the
foregoing individual performance factors. The executive
compensation established by the Board of Directors is based on its
overall subjective assessment of the value of the services
provided by each executive officer with consideration to the
performance factors discussed in this paragraph and peer group
compensation information.
Proxy Statement Page 13
The peer group of banks chosen by the Board of Directors for
purposes of making a comparative analysis of executive
compensation does not include all of the same banks incorporated
in the peer group established to compare shareholder returns as
indicated in the performance graph included in this proxy
statement. The Board of Directors uses data from compensation
surveys of the banking industry to assist in determining executive
pay. This group of Pennsylvania banking organizations bears no
direct relationship to those banking organizations represented in
the performance graph.
The Board of Directors established Mr. Bazewicz's base
salary, not including director fees, at $145,000 in 2001 and
increased his salary to $151,500 effective January 1, 2002. This
placed Mr. Bazewicz's base compensation between the median and
slightly above the median for chief executive officers of
comparable bank holding companies, as reflected in the peer group
compensation data reviewed by the Board of Directors. This salary
has been deemed by the Board of Directors to be commensurate with
the above average performance by First Keystone Corporation over
the past year including 2001 as measured by return on assets (ROA)
and return on equity (ROE).
Cash Bonuses
____________
The cash bonuses serve as short-term incentives which align
executive pay with the annual performance of the corporation. The
regular employee bonus program is for all employees, including
executives. It is based solely on the corporation's return on
equity for the year. The bonus has averaged between 5.0% and 8.8%
of each employee's salary for the past five years. The senior
management bonus provides further short-term incentive for senior
executives of the corporation. This bonus is earned through the
achievement of overall annual earnings objectives. Both bonus
programs help to align 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.
Long-Term Incentives: Stock Options
___________________________________
The Board of Directors believes that stock option awards
under the First Keystone Corporation's 1998 Stock Incentive 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. Thus, executive officers are
encouraged to manage the corporation with a view toward maximizing
long-term shareholder value. Under the Stock Incentive Plan, the
corporation makes grants of options to purchase shares of the
corporation's common stock to employees, including executives, and
the corporation has absolute power to determine what, to whom,
when and under what facts and circumstances awards are made. The
Board of Directors bases decisions relating to the awards on its
overall subjective assessment of the value of the services
provided by each executive officer with consideration to
performance of the corporation and peer group compensation
information. The options generally vest 6 months after issue and
expire ten years from the date of the grant. No options were
granted in 2001. On September 26, 2000, the corporation granted
12,250 incentive stock options under the plan, which became
exercisable on March 26, 2001. The average per share exercise
price is $17.00, which was not less than the full market value of
the shares as of September 26, 2000. The total number of shares
which may be issued under the plan is 100,000.
BOARD OF DIRECTORS
Robert E. Bull, Chairman Budd L. Beyer
Robert J. Wise, Vice Chairman Don E. Bower
J. Gerald Bazewicz, President Dudley P. Cooley
John L. Coates, Secretary Frederick E. Crispin, Jr.
John E. Arndt Jerome F. Fabian
Page 14 First Keystone Corporation
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 previously under "Base Salary".
EXECUTIVE COMPENSATION
Summary Compensation Table
__________________________
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 years ended
December 31, 2000, 1999, and 1998 of those persons who were:
* the Chief Executive Officer during 2001, and
* the other 4 most highly compensated executive
officers of the corporation and the bank at
December 31, 2001, whose total annual salary
and bonus exceeded $100,000 during 2001.
SUMMARY COMPENSATION TABLE
Annual Compensation
___________________
(a) (b) (c) (d) (e)
Other
Annual
Name and Compen-
Principal Salary Bonus sation
Position Year ($) ($) ($)
______ ____ ______ ______ _____
J. Gerald Bazewicz 2001 156,700 32,484 0
President and CEO 2000 150,200 19,119 0
of the corporation 1999 141,400 29,290 0
and the bank
David R. Saracino 2001 94,500 20,086 0
Treasurer and 2000 90,500 12,535 0
Assistant Secretary 1999 86,000 20,086 0
of the corporation
and Vice President,
Cashier and Assistant
Secretary of the bank
Leslie W. Bodle 2001 89,000 14,672 0
Vice President
and Trust Officer
of the bank
Long-Term Compensation
______________________
Awards Payouts
(f) (g) (h) (i)
Restricted All Other
Name and Stock Options/ LTIP Compen-
Principal Award(s) SARs sation
Position ($) Payouts ($)
(#) ($)
_______ ____ ______ _____ _____
J. Gerald Bazewicz 0 0 0 51,244
President and CEO 0 2,000 0 50,032
of the corporation 0 2,000 0 46,123
and the bank
David R. Saracino 0 0 0 48,785
Treasurer and 0 1,000 0 47,039
Assistant Secretary 0 1,000 0 43,474
of the corporation
and Vice President,
Cashier and Assistant
Secretary of the bank
Leslie W. Bodle 0 0 0 30,704
Vice President
and Trust Officer
of the bank
________________________
Proxy Statement Page 15
Amounts shown for Mr. Bazewicz consist of base salary and fees paid for
attendance at Board of Directors meetings of $11,700 in 2001, $11,700 in
2000, and $10,400 in 1999.
Bonus information is reported by the year in which earned.
Stock Appreciation Rights.
All amounts listed indicate options granted pursuant to First Keystone
Corporation's 1998 Stock Incentive Plan.
Long-Term Incentive Plan Awards.
Amounts shown for Mr. Bazewicz include contributions to the bank's 401(k)
Plan of $16,423 for 2001, $17,613 for 2000, and $15,933 for 1999, accrual
for the bank's Supplemental Employee Retirement Plan (SERP) of $33,346 in
2001, $30,944 in 2000, and $28,715 in 1999, and premiums on term life
insurance of $1,475 for 2001, 2000, and 1999. Amounts shown for Mr.
Saracino include contributions to the bank's 401(k) Plan of $10,771 for
2001, $11,677 for 2000, and $10,573 for 1999, accrual for the bank's
Supplemental Employee Retirement Plan (SERP) of $36,816 in 2001, $34,164 in
2000, and $31,703 in 1999, and premiums on term life insurance of $1,198 in
2001, 2000, and 1999. Amounts shown for Mr. Bodle include contributions to
the bank's 401(k) Plan of $9,920, accrual for the bank's Supplemental
Employee Retirement Plan (SERP) of $17,716, and premiums on term life
insurance of $3,068.
Stock Option Grants in Fiscal Year 2001
_______________________________________
The corporation did not grant any stock options in 2001.
Aggregated Option Exercises in 2001 and 2001 Year-End Option
Values
____________________________________________________________
The following table sets forth information about the number
of unexercised options and the value of unexercised options at
December 31, 2001, held by the executive officers of the
corporation named in the Summary Compensation Table. In 2001,
these executive officers did not exercise any stock options.
Shares
Acquired
on Value
Name Exercise Realized
____ _______ ________
J. Gerald Bazewicz -- --
David R. Saracino -- --
Leslie W. Bodle -- --
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, December 31,
2001 2001
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
____ ____________ _____________
J. Gerald Bazewicz 6,000/6,000 $5,250/$5,250
David R. Saracino 3,000/3,000 $2,625/$2,625
Leslie W. Bodle 3,000/3,000 $2,625/$2,625
______________________
All options granted through December 31, 2001, are reported.
Represents the difference between $19.625 (the last sale price of
the common stock on December 31, 2001), and the exercise price per
share of options multiplied by the number of exercisable and
unexercisable options held, respectively.
Page 16 First Keystone Corporation
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 contribution
annually to the plan, which when combined with the employee's
deferral and bank's matching contributions, cannot exceed 15% of
total eligible compensation. 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.
Contributions reflected as expense under this plan in 2001 and
2000 were:
2001 2000
____ ____
Matching contribution to savings plan $ 87,136 $ 81,262
Contribution to profit sharing plan 212,421 217,107
________ ________
Total Expense $299,557 $298,369
Of the $299,557 total expenses during 2001, $43,719 was
credited among the individual accounts of the 4 most highly
compensated executive officers of the bank. Of the $43,719, Mr.
Bazewicz was credited with $16,423, Mr. Saracino with $10,771, and
Mr. Bodle with $9,920. Messrs. Bazewicz and Saracino have been
members of the plan for 16 years and Mr. Bodle for 15 years.
Supplemental Employee Retirement Plan
_____________________________________
The corporation maintains a Supplemental Employee Retirement
Plan ("SERP") covering 4 of the bank's executive officers, Mr.
Bazewicz, Mr. Saracino, Mr. Bodle, and Mrs. Rishkofski. 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 either 60 years or 62 years, 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 in the amounts indicated below.
The salary continuation agreement 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. The established retirement benefit under the salary
continuation plan for Messrs. Bazewicz, Saracino, Bodle, and Mrs.
Rishkofski will be $3,750 per month, $2,333 per month, $1,750 per
month, and $417 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. No benefit will be paid if the executive officer
voluntarily terminates employment prior to attaining the stated
retirement age.
Proxy Statement Page 17
Other Executive Benefits
________________________
The corporation maintains the First Keystone Corporation 1998
Stock Incentive Plan to advance the development, growth and
financial condition of the corporation. Please refer to the
description of the 1998 Stock Incentive Plan in the Board
Compensation Committee Report above. The corporation also
maintains a bonus program for employees and for senior management,
which is also described above in the Board Compensation Committee
Report.
The bank has obtained term life insurance, designating the
bank as the beneficiary, on the life of each participating
executive officer in an amount which is intended to cover the
bank's obligation until the expense for the plan is fully accrued,
based upon certain actuarial assumptions. In 2001, the bank
expensed $105,533 for the accrual of the salary continuation plan
for the four executive officers. In addition, $5,741 was paid to
cover the year's premium on the term insurance policies.
PERFORMANCE GRAPH
The following graph and table compare the cumulative total
shareholder return on the corporation's common stock during the
period December 31, 1996, through and including
December 31, 2001, with
* the cumulative total return on the SNL Securities
Corporate Performance Index for banks with less
Than $500 million in total assets in the Middle
Atlantic area , and
* the cumulative total return for all United States
stocks traded on the NASDAQ Stock Market.
The comparison assumes $100 was invested on December 31,
1996, in the corporation's common stock and in each of the indices
below and assumes further the reinvestment of dividends into the
applicable securities. The shareholder return shown on the graph
and table below is not necessarily indicative of future
performance.
Page 18 First Keystone Corporation
(Performance Graph omitted)
(The following is a description of the performance graph in
tabular format)
FIRST KEYSTONE CORPORATION
Total Return Performance
Period Ending
______________________________
12/31/96 12/31/97 12/31/98
______________________________
First Keystone Corporation 100.00 188.62 327.04
NASDAQ - Total US 100.00 122.48 172.68
SNL <$500M Bank Index 100.00 170.47 155.65
Period Ending
_____________________________
12/31/99 12/31/00 12/31/01
_____________________________
First Keystone Corporation 208.92 173.87 224.71
NASDAQ - Total US 320.89 193.01 153.15
SNL <$500M Bank Index 144.08 138.99 192.27
________________
SNL Securities is a research and publishing firm specializing in
the collection and dissemination of data on the banking, thrift
and financial services industries.
The Middle Atlantic area comprises the states of Delaware,
Pennsylvania, Maryland, New Jersey, New York, the District of
Columbia and Puerto Rico.
RELATED PARTY TRANSACTIONS
Other than described below, there have been no material
transactions between the corporation and the bank, nor any
material transactions proposed, with any director or executive
officer of the corporation and the bank, or any associate of these
persons. The law firm Bull, Bull & Knecht, LLP, of which Director
Bull and his son, 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 $76,200 to the law firm during 2001. 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 19
Total loans outstanding from the corporation and the bank at
December 31, 2001, to the corporation's and the bank's 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 $3,009,245 or approximately 7.57% of 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, 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 2001 to officers and directors of
the corporation and the bank, and their affiliates as a group was
$3,310,926. The aggregate amount of outstanding indebtedness as
of the latest practicable date, March 1, 2002, to the above
described group was $2,890,898.
PRINCIPAL OFFICERS OF THE BANK
The following table presents selected information as of March
12, 2002, about the principal officers of the bank, each of whom
is elected by the Board of Directors and each of whom holds office
at the discretion of the Board of Directors:
Office and Position Held
Name with the Bank Since
____ ____________ _____
Robert E. Bull Chairman of the Board 1981
Robert J. Wise Vice Chairman 1996
of the Board
J. Gerald Bazewicz President and CEO 1987
John L. Coates Secretary 1995
David R. Saracino Vice President, 1983
Cashier and
Assistant Secretary
Leslie W. Bodle Vice President and 1985
Trust Officer
Sally A. Rishkofski Vice President 1997
Timothy K. Kishbach Vice President 2001
Number of
Bank Shares Age as of
Employee Beneficially March 12,
Name Since Owned 2002
____ _______ __________ _______
Robert E. Bull 170,095 79
Robert J. Wise 159,582 72
J. Gerald Bazewicz 1973 20,647 53
John L. Coates 7,029 65
David R. Saracino 1972 7,188 57
Leslie W. Bodle 1985 7,421 54
Sally A. Rishkofski 1964 4,909 62
Timothy K. Kishbach 1989 3,661 36
____________________
Messrs. Bull, Wise, and Coates are not employees of the bank.
For information on specific nature of ownership, please refer to
"Beneficial Ownership by Officers, Directors and Nominees".
Includes 3,000 shares which may be purchased upon the exercise of stock
options.
Includes 1,500 shares which may be purchased upon the exercise of stock
options.
Page 20 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 or to 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 18705, as the corporation's independent
auditors for its 2002 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 2001
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 2002 fiscal year, another accounting
firm may be chosen to provide independent audit services for the
2002 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, 2002.
ANNUAL REPORT
A copy of the corporation's Annual Report for its fiscal year
ended December 31, 2001, is enclosed with this Proxy Statement.
Additional copies of the Annual Report may be obtained by
contacting J. Gerald Bazewicz, President, 111 West Front Street,
Berwick, Pennsylvania 18603, telephone: (570) 752-3671. We
furnish the Annual Report to shareholders for their information.
It is not incorporated in this Proxy Statement.
Proxy Statement Page 21
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of the proxy rules of the Securities and Exchange
Commission, wishes to submit a proposal for inclusion in the
corporation's Proxy Statement for its 2003 Annual Meeting of
Shareholders must deliver the proposal in writing to the President
of First Keystone Corporation at its principal executive offices,
111 West Front Street, Berwick, Pennsylvania 18603, not later than
Tuesday, November 26, 2002. Also, if the corporation receives
notice of any shareholder proposal after February 12, 2003, the
persons named as proxies for the 2003 Annual Meeting will have
discretionary voting authority to vote on the proposal at that
meeting.
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.
ELECTRONIC ACCESS TO PROXY MATERIALS
AND
FINANCIAL STATEMENTS
The corporation is subject to the information reporting
requirements of the Securities Exchange Act of 1934 and must file
periodic financial reports, proxy statements and other information
with the SEC. You may obtain these documents, including the
corporation's report on Form 10-K for its fiscal year ended
December 31, 2001, which contains the corporation's audited
financial statements, at the SEC's web site at http://www.sec.gov.
You may also obtain a copy of the corporation's report on Form
10-K for its fiscal year ended December 31, 2001, without charge,
by submitting a written request to David R. Saracino, Treasurer,
First Keystone Corporation, 111 West Front Street, Berwick,
Pennsylvania 18603, telephone: (570) 752-3671.
Page 22 First Keystone Corporation
FIRST KEYSTONE CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 16, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints and William
Selden, Jr. and Francis J. Radice, each or any of them, proxies of
the undersigned, with full power of substitution, to vote all of
the shares of First Keystone Corporation (the "Corporation") that
the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of the Corporation to be held at the main office of
The First National Bank of Berwick, 111 West Front Street,
Berwick, Pennsylvania 18603 on Tuesday, April 16, 2002, at 10:00
a.m., Eastern Daylight Time, and at any adjournment or
postponement thereof as follows:
1. PROPOSAL #1: ELECTION OF CLASS C DIRECTORS TO SERVE FOR A
THREE-YEAR TERM
Don E. Bower John L. Coates Dudley P. Cooley
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
above (except as marked vote for all nominees
to the contrary below) listed above
(INSTRUCTION: IF YOU WISH TO WITHHOLD THE PROXIES'
AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE FOR DIRECTOR
LISTED ABOVE, WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)
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2. PROPOSAL #2: PROPOSAL TO RATIFY THE SELECTION OF J. H.
WILLIAMS & CO., LLP AS THE INDEPENDENT AUDITORS FOR THE
CORPORATION FOR THE YEAR ENDING DECEMBER 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR this proposal.
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting
and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE
AND FOR PROPOSAL 2.
Dated:______________, 2002
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Signature(s) (Seal)
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED
PROMPTLY TO THE CORPORATION IN THE ENCLOSED ENVELOPE. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD
SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER SHOULD SIGN.