A small but vocal group of investors in Peoples Westchester Savings Bank wants to upset the bank's pending merger with first Fidelity Bancorp.

At a shareholder meeting next month, the disgruntled group - which holds 1% of Peoples' stock - plans to distribute a proxy asking shareholders to turn down the deal.

It argues that Peoples sold out too cheaply and adds that neither bank adequately disclosed potential problems with the purchase formula.

The original agreement called for Peoples' shareholders to receive $43.90 a share, or $233 million, in cash and First Fidelity stock, with an escalator provision if First Fidelity's shares rose above an average of $50.50 during the 10 days preceding the sale.

But First Fidelity's shares tumbled 10% within a week of the deal's announcement. The two banks quickly amended the buyout formula so that shareholders would get less than $43.90 if the price of the stock averaged below $50.50 in the pre-closing period. The stock is currently trading at $47.125.

A First Fidelity spokesman declined to comment. Peoples chairman William F. Olson did not return phone calls.

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