<PAGE>
FIRST COLONIAL GROUP, INC.
76 South Main Street
Nazareth, Pennsylvania 18064
-----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held April 18, 1996
-----------------------------------------
To the Shareholders of First Colonial Group, Inc.:
The Annual Meeting of Shareholders of First Colonial Group, Inc.
("Company") will be held on Thursday, April 18, 1995, at 9:00 a.m., prevailing
time, at the Bethlehem Holiday Inn, Routes 22 and 512, Bethlehem, Pennsylvania
18017, for the purpose of considering and acting upon the following:
1. To elect two Class 2 directors to hold office for a term of four
years and until their successors are duly elected and qualified, as more fully
described in the accompanying Proxy Statement;
2. To approve the 1996 Employee Stock Option Plan, as more fully
described in the accompanying Proxy Statement; and
3. To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record, as shown by the transfer books of the
Company, at the close of business on March 8, 1996, will be entitled to notice
of, and to vote at, the Annual Meeting or any adjournment or postponement
thereof.
If the Annual Meeting is adjourned for one or more periods aggregating
at least 15 days because of the absence of a quorum, those shareholders entitled
to vote who attend the reconvened Annual Meeting, if less than a quorum as
determined under applicable law, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in this Notice of Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED
TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors
S. ERIC BEATTIE
President and Chief
Executive Officer
Nazareth, Pennsylvania
March 22, 1996
<PAGE>
FIRST COLONIAL GROUP, INC.
76 South Main Street
Nazareth, Pennsylvania 18064
(610) 746-7300
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited by the Board of Directors of First
Colonial Group, Inc. ("Company") for use at the Annual Meeting ("Meeting") of
Shareholders to be held on Thursday, April 18, 1996 at 9:00 a.m., prevailing
time, at the Bethlehem Holiday Inn, Routes 22 and 512, Bethlehem, Pennsylvania
18017, and any adjournments or postponements thereof. This Proxy Statement and
accompanying proxy card are first being mailed to Company shareholders on or
about March 22, 1996.
The cost of the solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
facsimile or similar means by officers, directors or employees of the Company,
without additional compensation. Upon request, the Company will pay the
reasonable expenses incurred by record holders of the Company's common stock,
par value $5.00 per share ("Common Stock"), who are brokers, dealers, banks or
voting trustees, or their nominees, for mailing proxy material and annual
shareholder reports to beneficial owners.
Only shareholders of record, as shown on the transfer books of the
Company, at the close of business on March 8, 1996 ("Record Date") will be
entitled to notice of, and to vote at, the Meeting. On the Record Date, there
were 1,474,028 shares of Common Stock outstanding. All share and per share
information in this Proxy Statement has been adjusted to reflect the 5% stock
dividend paid in June 1994.
Sending in a signed proxy will not affect a shareholder's right to
attend the Meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of the Company at any time before the
proxy is exercised.
Proxies in the accompanying form, properly executed and received in
time for voting, and not revoked, will be voted as indicated in accordance with
the instructions thereon. If no directions to the contrary are indicated, the
persons named in the enclosed proxy will vote all shares of Common Stock for the
election of all nominees for directors hereinafter named, and for Proposal 2 to
approve the Company's 1996 Employee Stock Option Plan, as more fully described
herein.
The presence, in person or represented by proxy, of the holders of a
majority of the outstanding shares of Common Stock will constitute a quorum for
the transaction of business at the Meeting. All shares of the Company's common
stock present in person or represented by proxy and entitled to vote at the
Annual Meeting, no matter how they are voted or whether they abstain from
voting, will be counted in determining the presence of a quorum. If the Annual
Meeting is adjourned because of the absence of a quorum, those shareholders
entitled to vote who attend the adjourned meeting, although constituting less
than a quorum as provided herein, shall nevertheless constitute a quorum for the
purpose of electing directors. If the Annual Meeting is adjourned for one or
more periods aggregating at least 15 days because of the absence of a quorum,
those shareholders entitled to vote who attend the reconvened Annual Meeting, if
less than a quorum as determined under applicable law, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
Notice of Annual Meeting.
<PAGE>
Except for certain restrictions (hereinafter summarized), each share of
Common Stock is entitled to one vote on each matter which may be brought before
the Meeting except that, in the election of directors, shareholders are entitled
to cumulate their votes. Cumulative voting entitles each shareholder to cast as
many votes as is equal to the number of shares held by such shareholder
multiplied by the number of directors to be elected; all such votes may be cast
for one candidate or they may be distributed among any two or more candidates in
the election. The persons named in the accompanying proxy may exercise
cumulative voting rights in any manner they deem desirable to secure the
election of as many as possible of the nominees named below. See "ELECTION OF
DIRECTORS."
The election of directors will be determined by a plurality vote and
the three nominees receiving the most "for" votes will be elected. Adoption of
the Company's 1996 Employee Stock Option Plan requires the affirmative vote of a
majority of the votes cast by all shareholders voting in person or by proxy
except as hereafter noted. Under the Pennsylvania Business Corporation Law, an
abstention, withholding of authority to vote or broker non-vote will not have
the same legal effect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
However, for purposes of compliance with the shareholder approval requirement
under Rule 16b-3 of the Securities Exchange Act of 1934 applicable to the
proposal to approve the Company's 1996 Employee Stock Option Plan, abstentions
may have the effect of an "against" vote and may be counted in determining
whether the proposal has received the required shareholder vote.
Article 7 of the Company's Amended and Restated Articles of
Incorporation, as amended, restricts the rights of a Person (as hereafter
defined) to cast (or execute written consents with respect to) more than 10% of
the total votes which all shareholders are entitled to cast at a meeting, unless
authorized to do so by the Board of Directors and subject to such conditions as
the Board of Directors may impose. The term "Person" includes not only
individuals and entities, but also groups of individuals and entities who act
together for the purpose of acquiring, holding, disposing of or voting Common
Stock.
The restrictions of Article 7 do not apply to the shares of Common
Stock held by the Bank for itself or as trustee of the Company's Employee Stock
Ownership Plan or other trusts. See "VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
The casting of votes by a Person as a proxy holder for other
shareholders is not counted in computing the 10% limitation to the extent that
the proxies so voted were revocable and were secured from other shareholders who
are not members of a group which includes such Person. Giving a revocable proxy
to a Person does not in itself cause the shareholder giving the proxy to be a
member of a group which includes such Person. Article 7 provides that the
determination by the Board of Directors of the existence or membership of a
group, and of a number of votes any Person or each member of a group is entitled
to cast, is final and conclusive absent clear and convincing evidence of bad
faith.
In the event of a violation of Article 7 and in addition to other
remedies afforded the Company, the judges of election cannot count votes cast in
violation of Article 7 and the Company or its nominees have an option to acquire
from the violator shares of Common Stock in excess of the 10% limit at prices
which would in certain situations be lower than the then current market price of
such shares.
The foregoing is a brief summary of Article 7 and is qualified and
amplified in all respects by the exact provisions of the Amended and Restated
Articles of Incorporation, as amended, a copy of which can be obtained in the
same manner as the Company's Annual Report on Form 10-KSB for 1995. See "ANNUAL
REPORT TO SHAREHOLDERS AND FORM 10-KSB".
-2-
<PAGE>
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the Meeting: (i)
matters which the Company does not know, a reasonable time before the proxy
solicitation, are to be presented at the Meeting; (ii) approval of the minutes
of a prior meeting of shareholders, if such approval does not amount to
ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this Proxy Statement
and the form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities
Exchange Act of 1934, and (v) matters incident to the conduct of the Meeting. In
connection with such matters, the persons named in the enclosed proxy will vote
in accordance with their best judgment.
The Company is not presently aware of any matters (other than
procedural matters) which will be brought before the Meeting which are not
reflected in the attached Notice of the Meeting. If any such matters are brought
before the Meeting, the persons named in the enclosed proxy will act or vote in
accordance with their best judgment.
ELECTION OF DIRECTORS
As permitted under Pennsylvania law, the Bylaws of the Company provide
for staggering the terms of office of the Company's directors by dividing the
Board of Directors into four classes, with members of each class serving
four-year terms. The Company's Bylaws further provide that the Board of
Directors shall consist of not fewer than five nor more than 25 directors, with
the exact number fixed by the Board of Directors. The Board of Directors
currently consists of nine members.
At the Meeting, the shareholders will elect two Class 2 directors to
serve for a term of four years and until their successors are elected and
qualified. As described above, shareholders are entitled to cumulative voting
rights in the election of directors.
The following table sets forth information, as of the Record Date,
concerning the Company's directors and nominees for election to the Board of
Directors. Unless directed otherwise, the persons named in the enclosed proxy
intend to vote such proxy for the election of the listed nominees or, in the
event of death, disqualification, refusal or inability of any nominee to serve,
for the election of such other persons as the management of the Company may
recommend in the place of such nominee to fill the vacancy. The Board has no
reason to believe that any of the nominees will not be a candidate or will be
unable to serve.
The director nominees named below were nominated by the Board of
Directors and currently serve as directors. All of the Company's directors were
first elected directors of the Company in 1983 except for Richard Stevens, III
and Gordon B. Mowrer, who were first appointed to the Board of Directors of the
Company in 1989 and Daniel Mulholland and Maria Zumas Thulin, who were first
appointed to the Board of Directors of the Company in 1994. In addition, all of
the directors and director nominees named below also serve on the Board of
Directors of the Company's banking subsidiary, Nazareth National Bank and Trust
Company ("Bank").
-3-
<PAGE>
<TABLE>
<CAPTION>
Name/Age Principal Occupation or Director of Term of
as of Record Date Employment for Past Five Years the Bank Since Office Expires
- -------------------------- ----------------------------------------------------- ----------------- ----------------
<S> <C> <C> <C>
Director Nominees
S. Eric Beattie President of the Company and Chief Executive 1982 1996
49 (1) Officer of the Company and the Bank since January,
1987, and President of the Bank since 1984
Robert C. Nagel Retired; Former Manager, Eastern Division 1976 1996
71 (1) (2) Metropolitan Edison Co. (electric utility), Easton,
Pennsylvania
Continuing Directors
Robert J. Bergren Retired; former Vice President Administration, SI 1982 1999
70 (1) (2) (3) Handling Systems, Inc. (manufacturer of materials
handling equipment), Easton, Pennsylvania
Paul A. Lentz Retired; former Consultant; former Professional 1971 1998
68 Manager, Coplay Cement Co. and Fuller Company
(cement industry), Bethlehem, Pennsylvania
Gordon B. Mowrer Pastor, Advent Moravian Church, Bethlehem, 1989 1999
60 Pennsylvania; former President, Hampson-Mowrer-
Kreitz Insurance Agency, Inc. (insurance sales)
Daniel B. Mulholland Vice President and General Manager, Mallinckrodt 1994 1997
43 Baker, Inc. (chemical manufacturing), Phillipsburg,
New Jersey since 1974
John J. Schlamp Chairman of the Board of the Company since 1974 1997
70 (1) (2) January, 1987 and of the Bank since 1984
Richard Stevens, III Division Manager (Marketing) for Computer Aid, 1989 1999
63 (1) (2) (3) Inc. (1987 to present); Director of Educational
Marketing for IBM (1983-1987)
Maria Zumas Thulin Executive Vice President, Arcadia Development 1994 1998
42 Corporation (real estate development and
management), Bethlehem, Pennsylvania since 1989
</TABLE>
- --------------------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
There are no other nominees for director known to the Company at this
time.
Under the Company's Bylaws, shareholders have the right to nominate
directors in accordance with the procedures specified therein. Nominations for
directors made by shareholders must be submitted in writing to the Secretary of
the Company not later than the close of business on the fifth day immediately
preceding the date of the meeting. All late nominations will be rejected. In
addition, at any time prior to the election of directors at a meeting of
shareholders, the Board of Directors may designate a substitute nominee to
replace any bona fide nominee who was nominated by a shareholder in accordance
with the Bylaws and who, for any reason, becomes unavailable for election as a
director.
-4-
<PAGE>
Board of Directors, Committees and Attendance at Meetings
The Board of Directors of the Company held 29 meetings during the
fiscal year ended December 31, 1995. The Executive Committee, which held 16
meetings during the fiscal year, makes recommendations to the Board of Directors
with respect to executive compensation and the Company's Stock Option Plan
(among other matters). The Board has a Compensation Committee which makes
decisions concerning executive compensation and stock options and which
administers the Company's Stock Option Plan. The Compensation Committee met one
time during the fiscal year ended December 31, 1995. The Board has an Audit
Committee, which meets at varying intervals. The purpose of the Audit Committee
is to review all recommendations made by the Company's independent public
accountants with respect to the accounting methods used and the system of
internal control followed by the Company and to advise the Board of Directors
with respect thereto. The Audit Committee held 9 meetings during the fiscal year
ended December 31, 1995. The Board does not have a nominating committee. During
the fiscal year ended December 31, 1995, all directors of the Company attended
at least 75% of the total number of meetings of the Board of Directors of the
Company and of all committees of which they were members.
Compensation of Directors
Directors of the Company and the Bank are compensated at the rate of
$140.00 per Board meeting attended, $140.00 per committee meeting attended and
$1,000 as a quarterly retainer fee. Each director has the option to defer some
or all of the annual directors' fees pursuant to the Deferred Compensation Plan
for Directors (the "Directors' Plan"). Any such deferred amount will be deemed
invested in an account paying interest equal to rates paid by the Bank on
individual retirement accounts. The director may elect the form and timing of
the benefits payable under the Directors' Plan, but, in general, such benefits
will be payable commencing at age 65. Benefits to a director under the
Directors' Plan are generally made in installments over a 15 year period. If a
director electing installments dies prior to receiving such director's full
benefits under the Directors' Plan, the remaining benefits will be made to the
named beneficiary. Upon establishment to the satisfaction of the Board of
Directors of the existence of a personal financial hardship, a director may
obtain an immediate distribution of some or all of such director's benefits
under the Directors' Plan.
Directors of the Company who are not employees of the Company or the
Bank are eligible to receive automatic grants of options to purchase shares of
Common Stock pursuant to the 1994 Stock Option Plan for Non-Employee Directors.
On April 20, 1995, Daniel B. Mulholland and Maria Z. Thulin were each granted an
option to purchase 1,050 shares of Common Stock at an exercise price of $15.75
per share, the fair market value of the Common Stock on the date of grant. See
"EXECUTIVE COMPENSATION - 1994 Stock Option Plan for Non-Employee Directors."
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information, as of the Record
Date, with respect to the beneficial ownership of the Company's Common Stock by
(1) each shareholder known by the Company to own beneficially more than five
percent of the Company's outstanding Common Stock, (2) all directors of the
Company and the Bank, (3) all executive officers of the Company named in the
Summary Compensation Table which follows and (4) all directors and executive
officers of the Company and the Bank as a group. Except as otherwise specified,
the named beneficial owner has sole voting and investment power with respect to
his shares. The shareholdings set forth below reflect all stock dividends paid
and stock splits effected by the Company through the Record Date, and are
rounded to the nearest whole share.
-5-
<PAGE>
<TABLE>
<CAPTION>
Amount of
Common Stock
Beneficially Percent of
Name Owned (a) Class(a)
- -------------------------------------------------------------------------- ---------------------- ----------------
<S> <C> <C>
Employee Stock Ownership Plan ("ESOP") Trust
Nazareth National Bank and Trust Company, Trustee
76 South Main Street
Nazareth, PA 18064 (b)................................................. 196,805 13.4
S. Eric Beattie (c)..................................................... 25,448 1.7
Robert J. Bergren (d)................................................... 3,719 *
Paul A. Lentz (e)....................................................... 6,752 *
Gordon B. Mowrer (e).................................................... 2,307 *
Daniel B. Mulholland (f)................................................ 1,949 *
Robert C. Nagel (g)..................................................... 13,113 *
John J. Schlamp (h)..................................................... 12,095 *
Richard Stevens, III (i)................................................ 3,335 *
Maria Zumas Thulin (j).................................................. 475 *
All Directors and Executive Officers as a
Group (13 persons) (k).................................................. 88,244 5.9
</TABLE>
- --------------------
* Less than 1%.
(a) The securities "beneficially owned" by an individual are determined
as of the Record Date in accordance with the definition of "beneficial
ownership" set forth in the regulations of the Securities and Exchange
Commission. Accordingly, they may include securities owned by or for,
among others, the spouse and/or minor children of the individual and
any other relative who has the same home as such individual, as well as
other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days after the Record Date. Beneficial ownership may
be disclaimed as to certain of the securities.
(b) Includes 146,678 allocated and 50,127 unallocated shares.
Participants in the ESOP have "pass-through" voting rights and are
entitled to direct the vote on all shares allocated to their accounts
as of the Record Date. Unallocated shares, as well as allocated shares
for which no voting directions are received, are voted by the plan
administrators, who are appointed by the Board of Directors and who
have sole investment power with respect to all shares held in the plan.
Does not include shares held by the Bank in various other trusts for
which the Bank, in its capacity as trustee, has or shares voting or
investment power. As of the Record Date, the Bank had or shared voting
or investment power with respect to 75,890 shares held in trust for the
Company's Dividend Reinvestment and Stock Purchase Plan, 19,122 shares
held in trust for the Company's Optional Deferred Salary Plan and
192,733 shares held in various other trust accounts.
(c) Includes 10,667 shares allocated to his account under the ESOP and
7,444 shares issuable upon the exercise of options granted pursuant to
the Company's Stock Option Plan. Also includes 116 shares held by his
daughter and 232 shares held by Mr. Beattie in custody for his two
sons.
(d) Includes 658 shares owned by his spouse and 525 shares issuable upon
the exercise of options granted pursuant to the 1994 Stock Option Plan
for Non-Employee Directors.
(e) Includes 525 shares issuable upon the exercise of options granted
pursuant to the 1994 Stock Option Plan for Non-Employee Directors.
-6-
<PAGE>
(f) Includes 685 shares owned by his spouse in custody for his son, 801
shares owned jointly with his spouse and 263 shares issuable upon the
exercise of options granted pursuant to the 1994 Stock Option Plan for
Non-Employee Directors.
(g) Includes 498 shares held by the Bank as trustee of an IRA Rollover
Trust, 1,927 shares owned jointly with his spouse, 4,807 shares owned
by his spouse and 525 shares issuable upon the exercise of options
granted pursuant to the 1994 Stock Option Plan for Non-Employee
Directors.
(h) Includes 10,000 shares held by the Bank as trustee of an IRA Rollover
Trust, 826 shares owned by his spouse and 525 shares issuable upon the
exercise of options granted pursuant to the 1994 Stock Option Plan for
Non-Employee Directors. Also includes 179 shares owned by his son and
daughter-in-law as to which Mr. Schlamp disclaims beneficial ownership.
(i) Includes 2,000 shares held in a trust for the benefit of Mr. Stevens
for which Mr. Stevens and the Bank are co-trustees and 525 shares
issuable upon the exercise of options granted pursuant to the 1994
Stock Option Plan for Non-Employee Directors.
(j) Includes 263 shares issuable upon the exercise of options granted
pursuant to the 1994 Stock Option Plan for Non-Employee Directors.
(i) Includes an aggregate of 11,856 shares issuable upon the exercise of
options granted pursuant to the Company's Stock Option Plan, an
aggregate of 3,676 shares issuable upon the exercise of options granted
pursuant to the 1994 Stock Option Plan for Non-Employee Directors and
23,008 shares allocated under the ESOP to the accounts of all executive
officers of the Company and the Bank, as a group.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation paid by the
Company and the Bank for services rendered in all capacities to the Company and
its subsidiaries during the fiscal years ended December 31, 1995, 1994 and 1993
to (1) the Chief Executive Officer of the Company and the Bank and (2) each
executive officer of the Company and the Bank whose salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ ------------------------------
Other Annual All Other
Name and Principal Position Fiscal Year Salary Bonus Compensation Securities Underlying Options Compensation
- --------------------------- ----------- ----------- ---------- ------------- ------------------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
S. Eric Beattie, President, 1995 $154,005 $-- $9,600(1) -- $14,080(2)
Chief Executive Officer
and Director of the 1994 $150,757 $4,530 $10,440(1) 2,000 $13,750
Company and Bank
1993 $148,136 $4,444 $9,320(1) -- $11,878
</TABLE>
- -----------------------------
(1) Represents director fees.
-7-
<PAGE>
(2) Includes a contribution to his account in the Company's Employee Stock
Ownership Plan of $7,977, the Company's matching contribution to his
account under the Optional Deferred Salary Plan of $3,850 and
reimbursement pursuant to the Company's medical reimbursement program
of $2,253.
Stock Option Plan
In December 1986, the Board of Directors of the Company adopted the
Stock Option Plan, which was approved by the shareholders of the Company in
April, 1987 (the "Plan"). Pursuant to the Plan, stock options may be granted
which qualify under the Code as incentive stock options ("Incentive Options") as
well as stock options that do not qualify as Incentive Options under the Code
("Non-Qualified Options"). All officers and key employees of the Company or any
current or future subsidiary who are employed on a full-time basis will be
eligible to receive an option or options under the Plan. As of December 31,
1995, options to purchase an aggregate of 16,169 shares of Common Stock had been
granted pursuant to the Plan, of which 11,856 are currently exercisable.
If Proposal Two is approved, the 1996 Employee Stock Option Plan will
replace the Plan.
The purpose of the Plan is to provide additional incentive to employees
of the Company by encouraging them to invest in the Company's Common Stock and
thereby acquire a proprietary interest in the Company and an increased personal
interest in the Company's continued success and progress. The Plan is
administered by the Compensation Committee (the "Committee") which is appointed
by the Board and consists only of directors who are not eligible to receive
options under the Plan. The Committee is to determine, among other things, which
officers and key employees receive an option or options under the Plan, the type
of option (Incentive Options or Non-Qualified Options, or both) to be granted,
the number of shares subject to each option, the rate of option exercisability,
and, subject to certain other provisions to be discussed below, the option price
and duration of the option.
The aggregate number of shares which may be issued upon the exercise of
options under the Plan is 86,821 shares of Common Stock. With respect to
Incentive Options granted after December 31, 1986, the aggregate fair market
value, determined at the time the Incentive Option is granted, of the shares
with respect to which Incentive Options are exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. No similar
restriction is contained for Non-Qualified Options granted under the Plan.
Except as otherwise described below, none of the options granted under
the Plan may be exercised during the first year after the date granted. On and
after one year and prior to two years after the date granted, up to 25% of the
options granted may be exercised; on and after two years and prior to three
years after the date granted, up to 50% of the options granted may be exercised;
on and after three years and prior to four years after the date granted, up to
75% of the options granted may be exercised; on and after four years and prior
to ten years (ten years and ten days, in the case of a Non-Qualified Option)
from the date granted, up to 100% of the options granted may be exercised.
The option price for stock options issued under the Plan is to be an
amount at least equal to 100% of the fair market value of the Company's Common
Stock, as of the date the option is granted. The fair market value is to be
determined by the Committee. In the event of "change in control" of the Company,
as defined in the Plan, each optionee may exercise the total number of shares
then subject to the option.
Unless terminated earlier by the option's terms, Incentive Options
expire ten years after the date they are granted and Non-Qualified Options
expire ten years and ten days after the date they are granted.
-8-
<PAGE>
No options were granted under the Plan during the year ended December
31, 1995 to the executive officers of the Company named in the Summary
Compensation Table.
The following table sets forth certain information concerning the
number of unexercised options and the value of unexercised options at December
31, 1995 held by the executive officers of the Company named in the Summary
Compensation Table. No options were exercised by such executive officers during
the fiscal year ended December 31, 1995.
Aggregated Option Exercises in 1995 and December 31, 1995 Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at
at December 31, 1995 December 31, 1995 (1)
------------------------------------- -----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------- ------------------ ----------------- -------------------- --------------------
<S> <C> <C> <C> <C>
S. Eric Beattie.................. 7,445.75 1,500 $625.00 $1,875.00
</TABLE>
- --------------------------
(1) Represents the difference between $18.00, the last sale price of the
Common Stock on December 31, 1995 as reported on the Nasdaq National
Market, and the exercise price per share of in-the-money options
multiplied by the number of exercisable and unexercisable options held,
respectively.
1994 Stock Option Plan for Non-Employee Directors
In March 1994, the Board of Directors adopted, and in April 1994 the
shareholders approved, the 1994 Stock Option Plan for Non-Employee Directors
(the "Director Plan"). An amendment to the Director Plan was approved by the
shareholders in April 1995. The purpose of the Director Plan is to provide
additional incentive to members of the Boards of Directors of the Company and
each present and future subsidiary corporation who are not also employees by
encouraging them to invest in the Company's Common Stock and thereby acquire a
further proprietary interest in the Company and an increased personal interest
in the Company's continued success and progress.
Pursuant to the Director Plan, each person who was, as of May 1, 1994,
a director of the Company or any subsidiary corporation, and who was not as of
such date an employee of the Company or any subsidiary corporation, was, as of
May 1, 1994, automatically granted an option to purchase 1,050 shares of the
Company's Common Stock. Non-employee directors who were first elected or
appointed to the Board after May 1, 1994 receive an automatic grant of options
under the Director Plan upon the date of their election or appointment, except
that any non-employee director appointed after May 1, 1994 and prior to the 1995
Annual Meeting of Shareholders received an automatic grant of options on the
date of the 1995 Annual Meeting. On the fifth anniversary of the initial option
grant under the Director Plan and provided a grant recipient continues to be a
non-employee director on such anniversary, such person shall, on such fifth
anniversary, automatically be granted an option to purchase 1,050 shares of the
Company's Common Stock or such lower number of shares as shall be equal to the
number of shares as shall then be available (if any) for grant under the
Director Plan divided by the number of persons who are to receive an option on
such anniversary.
The Director Plan is administered by the Board of Directors of the
Company, including non-employee directors. Under the Director Plan, the Board
has the right to adopt such rules for the
-9-
<PAGE>
conduct of its business and the administration of the Director Plan as it
considers desirable. The Board of Directors has the exclusive right to construe
the Director Plan and the options issued pursuant to it, to correct defects and
omissions and to reconcile inconsistencies to the extent necessary to effectuate
the purpose of the Director Plan and the options issued pursuant to it.
The aggregate number of shares which may be issued upon the exercise of
options under the Director Plan is 21,000 shares of the Company Common Stock. In
the event of any change in the capitalization of the Company, such as by stock
dividend, stock split or what the Board of Directors deems in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under the Director Plan will be appropriately adjusted in a
manner determined in the sole discretion of the Board of Directors. Reacquired
shares of the Company's Common Stock, as well as unissued shares, may be used
for the purpose of the Director Plan. Common Stock of the Company subject to
options which have terminated unexercised, either in whole or in part, will be
available for future options granted under the Director Plan.
The option price for options issued under the Director Plan shall be
equal to the fair market value as determined by the Board of the Company Common
Stock on the date of grant of the option. Payment of the option price on
exercise of options granted under the Director Plan may be made in (a) cash, (b)
(unless prohibited by the Board of Directors) Company Common Stock which will be
valued by the Secretary of the Company at its fair market value on the date of
delivery or (c) (unless prohibited by the Board of Directors) any combination of
cash and Common Stock of the Company valued as provided in clause (b).
Options granted pursuant to the Director Plan may be exercised at the
following rates, whichever is higher: (i) 25% commencing one year after the date
of their grant, 50% after two years, 75% after three years and 100% after four
years, or (ii) 100% commencing upon a "change in control" of the Company, as
such term is defined in the Director Plan. Unless terminated earlier by the
option's terms, options granted under the Director Plan expire ten years after
the date they are granted. Options terminate three months after the optionee
ceases to be a director of the Company or a subsidiary corporation (whether by
death, disability, resignation, removal, failure to be reelected or otherwise,
and regardless of whether the failure to continue as a director was for cause or
otherwise), but not later than ten years after the date of option grant. Options
granted pursuant to the Director Plan are not transferable, except by the will
or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability. Options may not be granted pursuant to the Director Plan after the
expiration of eight years from and after the adoption of the Director Plan by
the Company's shareholders at the 1994 Annual Meeting. Options granted pursuant
to the Director Plan will not qualify as incentive stock options under the Code.
Severance Agreement
On July 19, 1994, the Bank entered into a Severance Agreement with S.
Eric Beattie providing for certain severance payments in the event that (a) the
Bank terminates his employment without cause or (b) Mr. Beattie terminates his
employment with the Bank (i) for any reason, whether with or without cause, at
any time within three years after a "change in control" of the Bank, or (ii) due
to the fact that, without his consent and whether or not a change in control of
the Bank has occurred, the nature and scope of his duties and authority or his
responsibilities with the Bank or the surviving or acquiring person are reduced
to a level below that which he enjoys on the date of the agreement, his then
current base annual salary is reduced to a level below that which he enjoys on
the date of the agreement or at any time thereafter (whichever may be greater),
the fringe benefits which the Bank provides him on the date of the agreement or
at any time thereafter
-10-
<PAGE>
(whichever may be greater) are materially reduced, his position or title with
the Bank or the surviving or acquiring person is reduced from his current
position or title with the Bank, or his principal place of employment with the
Bank is changed to a location greater than 80 miles from his current principal
place of employment with the Bank.
A "change in control" is defined as a change within a 12 month period
in a majority of the members of the Board of Directors of the Bank or the
Company, a change within a 12 month period in holders of more than 50% of the
outstanding voting stock of the Bank or the Company or any other event deemed to
constitute a "change in control" by the Compensation Committee.
The term of Mr. Beattie's Severance Agreement is three years or the
earlier of his death or permanent disability, the termination of his employment
for cause, mutual agreement, resignation or otherwise. "Cause" is defined as a
conviction for any felony, fraud or embezzlement or failure or refusal to comply
with the written policies or directives of the Board of Directors of the Bank or
for being guilty of misconduct in connection with the performance of his duties
for the Bank and failure to cure such non-compliance or misconduct within 20
days of receiving written notice from the Board of Directors of the Bank.
In the event that Mr. Beattie is entitled to severance payments, he
will be paid annual compensation for a period of three years following the date
on which his employment is terminated ("Termination Date") at a rate equal to
100% of his highest annual cash compensation, including cash bonuses, during the
three year period ending on the Termination Date, without offset for subsequent
earnings, subject to reduction to reduce the present value of any "parachute
payments", determined pursuant to Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder, to below 300% of
his "base amount" (as defined in Section 280G(b)(3)(A) of the Code and the
regulations). Any severance payments made to Mr. Beattie after he reaches age 65
will be reduced by the amount of any pension or annuity benefits Mr. Beattie
would have received under the Bank's defined benefit pension plan if he had
retired at age 65 (regardless of when he actually retired) and had elected the
single life annuity benefit (regardless of the benefit he actually elected). Mr.
Beattie will also be entitled to certain benefits.
The Severance Agreement also contains provisions restricting Mr.
Beattie's right to compete with the Bank in Northampton County, Pennsylvania for
a period of one year following the Termination Date.
1996 Bonus Plan
The Board has approved a bonus plan for 1996 pursuant to which Mr.
Beattie and the four other executive officers of the Company will be eligible
for a bonus from a bonus pool of up to $70,000 if the Company's income for 1996
(prior to year-end adjustments) exceeds the budgeted goal. Bonuses will be
distributed from the bonus pool in the discretion of the President and as
approved by the Executive Committee of the Board of Directors.
Executive Benefit Program
In 1985, the Bank established an Executive Benefit Program (the
"Program") for certain of its officers. Currently, seven officers of the Bank
are eligible to participate in the Program. Like the Incentive Plan, any
non-current obligation of the Bank under the Program constitutes an unfunded
general obligation of the Bank. The Program is administered by the Executive
Committee of the Board of the Bank and provides participants with the following
benefits:
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<PAGE>
(1) Medical Reimbursement Program. Subject to a maximum, the Bank
reimburses participants in the Program for medical or dental expenses which they
or their dependents incur and which are not otherwise covered by an existing
medical insurance plan or other reimbursement arrangement.
(2) Salary Continuation Program. If a participant in the Program dies
while in the employ of the Bank, his designated beneficiary is entitled to
receive 70% of his base-year salary (as defined in the Program) for one year
after his death and thereafter 35% of his base-year salary until the earlier to
occur of the 10th anniversary of his death or the date on which the participant
would have attained age 65.
(3) Supplemental Retirement Income Program. If a participant in the
Program is continuously employed by the Bank through retirement on or after age
65, the participant will be entitled to a "target benefit" equal to a specified
percentage of the participant's average annual compensation during the five
years immediately prior to his retirement. The "target benefit" amount is to be
provided with reference to the participant's benefits under (a) the Salary Plan
(to the extent of the Bank's contribution only, and excluding employee deferral
amounts or voluntary contributions); (b) the ESOP (including amounts transferred
to the Program as a result of the termination of the Bank's Defined Benefit
Pension Plan); and (c) each participant's Social Security benefits (to the
extent of the participant's primary insurance amount). If amounts payable to the
participant from those three sources are insufficient to fund the "target
benefit", the Bank is obligated to provide the shortfall in an annual
supplemental benefit. Each participant is entitled to terminate before reaching
age 65 and receive the "target benefit" computed as above (with certain
modifications and assumptions), reduced by a factor to reflect the participant's
earlier separation from service. However, if the participant's earlier
separation from service is due to dishonesty, collaboration with a competitor,
fraud or similar cause, the participant will forfeit all benefits under the
Supplemental Retirement Income Program. In general, no separate death benefit is
payable under the Program, except with respect to a participant who dies in the
active employment of the Bank after attaining age 65. Benefits under the Program
will be paid in equal monthly installments during the participant's lifetime,
unless an annuity form of payment is selected.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company's Dividend Reinvestment and Stock Purchase Plan
purchased 15,573 original issue shares of Common Stock from the Company at an
average purchase price of $15.99 per share.
Gordon B. Mowrer, a director of the Company and the Bank, is a director
and was a principal shareholder of an insurance agency to which the Company and
the Bank paid approximately $107,609 in premiums for property, casualty and
workers compensation insurance coverage in the year ended December 31, 1995.
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with many of its directors,
officers and their associates. All extensions of credit to such persons have
been made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and in the opinion of the management
of the Company and the Bank, do not involve more than a normal risk of
collectibility or present other unfavorable features.
-12-
<PAGE>
PROPOSAL TWO
1996 EMPLOYEE STOCK OPTION PLAN
In March 1996, the Board of Directors of the Company adopted the 1996
Employee Stock Option Plan (the "1996 Plan"), subject to approval by the
shareholders of the Company. The 1996 Plan will replace the Stock Option Plan
which expires in December 1996. Pursuant to the 1996 Plan, stock options may be
granted which qualify under the Code as incentive stock options as well as stock
options that do not qualify as incentive stock options or are designated as not
intended to so qualify. All officers and key employees of the Company or any
current or future subsidiary corporation are eligible to receive options under
the 1996 Plan.
The Board of Directors recommends that the 1996 Plan be approved
because it believes that the 1996 Plan will advance the interest of the Company
and its shareholders by strengthening the Company's ability to attract, retain
and motivate officers and key employees.
Set forth below is a summary of the provisions of the 1996 Plan. This
summary is qualified and amplified in its entirety by the detailed provisions of
the text of the actual 1996 Plan set forth as Exhibit A to this Proxy Statement,
all of which is incorporated herein.
Purpose
The purpose of the 1996 Plan is to provide additional incentive to
employees of the Company by encouraging them to invest in the Company's Common
Stock and thereby acquire a proprietary interest in the Company and an increased
personal interest in the Company's continued success and progress.
Administration
The 1996 Plan will be administered by the Compensation Committee
("Committee") which is appointed by the Board of Directors and consists only of
Directors who are not eligible to receive options under the 1996 Plan. The
Committee determines, among other things, which officers and key employees
receive an option or options under the 1996 Plan, the type of option (incentive
stock options or non-qualified stock options, or both) to be granted, the number
of shares subject to each option, the rate of option exercisability, and,
subject to certain other provisions to be discussed below, the option price and
duration of the option.
The Committee may, in its discretion, amend or supplement any of the
option terms hereafter described, provided that if an incentive option is
granted under the 1996 Plan, the option as amended or supplemented continues to
be an incentive stock option.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options under the 1996 Plan is 250,000 shares of Common Stock. In the event of
any change in the capitalization of the Company, such as by stock dividend,
stock split or what the Board of Directors deems in its sole discretion to be
similar circumstances, the aggregate number and kind of shares which may be
issued under the 1996 Plan will be appropriately adjusted in a manner determined
in the sole discretion of the Board of Directors. Reacquired shares of the
Company's Common Stock, as well as unissued shares, may be used for the purpose
of the 1996 Plan. Common Stock of the Company subject to options which have
terminated unexercised, either in whole or in part, will be available for future
options granted under the 1996 Plan.
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<PAGE>
Option Price
The option price for incentive stock options issued under the 1996 Plan
must be at least equal to 100% of the fair market value of the Common Stock as
of the date the option is granted. The fair market value is determined by the
Committee. The option price for non-qualified stock options issued under the
1996 Plan may, in the discretion of the Compensation Committee, be at less than
the fair market value of the Common Stock as of the date the option is granted.
Payment
Payment of the option price on exercise of options granted under the
1996 Plan may be made in (a) cash and includes cash received from a stock
brokerage firm in a so-called "cashless exercise", (b) (unless prohibited by the
Board of Directors) Common Stock of the Company which will be valued by the
Secretary of the Company at its fair market value or (c) (unless prohibited by
the Board of Directors) any combination of cash and Common Stock of the Company
valued as provided in clause (b).
Under the terms of the 1996 Plan, the Board has interpreted the
provision of the 1996 Plan which allows payment of the option price in Common
Stock of the Company to permit the "pyramiding" of shares in successive
exercises. Thus, an optionee could initially exercise an option in part,
acquiring a small number of shares of Common Stock, and immediately thereafter
effect further exercises of the option, using the Common Stock acquired upon
earlier exercises to pay for an increasingly greater number of shares received
on each successive exercise. This procedure could permit an optionee to pay the
option price by using a single share of Common Stock or a small number of shares
of Common Stock and to acquire a number of shares of Common Stock having an
aggregate fair market value equal to the excess of (a) the fair market value (as
determined above) of all shares to which the option relates over (b) the
aggregate exercise price under the option. A vote in favor of Proposal Two is
also a vote in favor of this interpretation.
Exercisability
Except as otherwise described below, none of the options granted under
the 1996 Plan may be exercised during the first year after the date granted. On
and after one year and prior to two years after the date granted, up to 25% of
the options granted may be exercised; on and after two years and prior to three
years after the date granted, up to 50% of the options granted may be exercised;
on and after three years and prior to four years after the date granted, up to
75% of the options granted may be exercised; on and after four years and prior
to ten years from the date granted, up to 100% of the options granted may be
exercised in the event of a "change in control" of the Company, as defined in
the 1996 Plan, each optionee may exercise the total number of shares then
subject to the option. Consequently, the approval of the 1996 Plan may be deemed
to have certain "anti-takeover" and "anti-greenmail" effects. The Committee has
the authority to provide for a different rate of option exercisability for any
optionee.
Option Expiration and Termination
Unless terminated earlier by the option's terms, expire ten years after
the date they are granted.
Options terminate three months (but not later than the scheduled
termination date) after the date on which employment is terminated (whether such
termination be voluntary or involuntary) other than by reason of retirement at
age 65 (or such earlier retirement age as may be approved by the Compensation
Committee), death or disability. The option terminates one year from the date
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<PAGE>
of termination of employment due to retirement, death or disability (but not
later than the scheduled termination date).
Non-Transferability
Options granted pursuant to the 1996 Plan are not transferable, except
by Will or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
Amendment or Termination; Plan Expiration
The Company's Board of Directors has the right at any time, and from
time to time, to amend, supplement, suspend or terminate the 1996 Plan, without
shareholder approval, except to the extent that shareholder approval of the 1996
Plan amendment or supplement is required by the Code to permit the granting of
incentive stock options under the 1996 Plan. Any such action will not affect
options previously granted. If the Board of Directors voluntarily submits a
proposed amendment, supplement, suspension or termination for shareholder
approval, such submission will not require any future amendments, supplements,
suspensions or terminations (whether or not relating to the same provision or
subject matter) to be similarly submitted for shareholder approval. Options may
not be granted under the 1996 Plan after March 21, 2006.
Option Grants
As of March 15, 1996, no options had been granted under the 1996 Plan.
The following table sets forth information concerning options issued to
date under the Company's existing Stock Option Plan. No options have been
exercised to date.
<TABLE>
<CAPTION>
Total Weighted Average
Name Options Granted Exercise Price
---- --------------- ----------------
<S> <C> <C>
S. Eric Beattie..................................... 8,945.75 $18.40
All Executive Officers and
Directors as a Group............................. 16,168.61 $18.12
All Employees, other than Executive
Officers and Directors, as a Group.................. - 0 - $--
</TABLE>
On March 18, 1996, the last sale price of the Company's Common Stock
was $19.375.
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<PAGE>
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION
OF THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE 1996 PLAN AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Code, an optionee will not realize taxable income
by reason of the grant or the exercise of an incentive stock option ("Incentive
Option") (see, however, discussion of Alternative Minimum Tax below). If an
optionee exercises an Incentive Option and does not dispose of the shares until
the later of (i) two years from the date the option was granted and (ii) one
year from the date of exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and the Company will not be entitled to any deduction. If an optionee
disposes of the shares within the period of two years from the date of grant or
one year from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and the
Company will receive a corresponding deduction, in an amount equal to the excess
of (1) the lesser of (a) the amount, if any, realized on the disposition and (b)
the fair market value of the shares on the date the option was exercised (or
such later date, if applicable, as described below in "Non-Qualified Options",
if the optionee is a "16(b) Person" who has not made an "83(b) Election," as
such terms are defined in "Non-Qualified Options" below) over (2) the option
price. Any additional gain realized on the disposition will be long-term or
short-term capital gain and any loss will be long-term or short-term capital
loss. The optionee will be considered to have disposed of a share if he sells,
exchanges, makes a gift of or transfers legal title to the share (except
transfers, among others, by pledge, on death or to spouses). If the disposition
is by sale or exchange, the optionee's tax basis will equal the amount paid for
the share plus any ordinary income realized as a result of the disqualifying
disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise (or such later date, if applicable, as
described below in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not made an 83(b) Election) exceeds the option exercise price is an
adjustment for purposes of computing the so-called alternative minimum tax. In
the event of a disqualifying disposition of the shares in the same taxable year
as exercise of the Incentive Option, no adjustment is then required for purposes
of the alternative minimum tax, but regular income tax, as described above, may
result from such disqualifying disposition. Effective January 1, 1994, the
Revenue Reconciliation Act of 1994 replaced the 24% alternative minimum tax rate
on individuals with a two-tier alternative minimum tax rate having an initial
rate of 26% and a second-tier rate of 28% on alternative minimum taxable income
over $175,000.
An optionee who surrenders shares as payment of the exercise price of
his Incentive Option generally will not recognize gain or loss on his surrender
of such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such stock, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
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<PAGE>
Under the Code, all of the shares received by an optionee upon exercise
of an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option had
been exercised for cash.
Non-Qualified Options
Generally, there will be no federal income tax consequences to either
the optionee or the Company on the grant of Non-Qualified Options granted
pursuant to the 1996 Plan. On the exercise of a Non-Qualified Option, the
optionee (except as described below) has taxable ordinary income equal to the
excess of the fair market value of the shares acquired on the exercise date over
the option price of the shares. The Company will be entitled to a federal income
tax deduction (subject to the limitations contained in Section 162) in an amount
equal to such excess. However, special rules apply where stock is registered
under the Exchange Act and the optionee is an officer, director or 10% or
greater shareholder of the Company subject to potential liability under Section
16(b) of the Securities Exchange Act of 1934 ("Exchange Act") for so-called
"short-swing" profits (a "16(b) Person") in connection with certain purchases
and sales, or sales and purchases, of the Company's stock within a period of six
months.
Under SEC rules promulgated under Section 16(b) of the Exchange Act,
the grant of an option, not its exercise, is treated as a "purchase" for Section
16(b) purposes. If such grant is made pursuant to a plan qualifying under the
SEC rules and six months elapse between the grant of the option and the sale of
the shares received upon the exercise thereof, such grant will be exempt from
Section 16(b). With respect to the exercise of a Non-Qualified Option, if a
16(b) Person has not purchased or acquired shares of Common Stock within the six
month period prior to the exercise date (other than purchases or acquisitions
exempt from Section 16(b)), the 16(b) Person will be required to recognize
ordinary income (i) six months after the date of grant (in the event of exercise
within six months of the date of grant) or (ii) the date of exercise (in the
event of exercise after six months from the date of grant). The timing of income
recognition with respect to a 16(b) Person who exercises a Non-Qualified Option
within six months of a prior non-exempt purchase or acquisition of Common Stock
is uncertain. It is possible that the Internal Revenue Service will take the
position that, despite the prior non-exempt purchase or acquisition, the 16(b)
Person recognizes income on the date of exercise rather than the date which is
six months following the date of such prior non-exempt purchase or acquisition.
A 16(b) Person can be certain of recognizing income on the exercise date by
making an election not later than 30 days following the exercise date to have
the income determined as of the date of exercise (an "83(b) Election"), in which
case the Company's deduction will also be determined as of the exercise date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of capital
gains for the year plus $3,000 for individuals.
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<PAGE>
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying disposition.
See "Federal Income Tax Consequences - Incentive Stock Options". The optionee
will recognize ordinary income on the exercise of the Non-Qualified Option as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered will have the same tax basis
and capital gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market value on the
date of exercise and the capital gains holding period will begin on the date of
exercise (or such later date, as described above, if the optionee is a 16(b)
Person who has not made an 83(b) Election, and such later date is applicable).
Limitation on Company's Deduction
Section 162(m) of the Code will generally limit to $1.0 million the
Company's federal income tax deduction for compensation paid in any year to its
chief executive officer and its four highest paid executive officers, to the
extent that such compensation is not "performance based." Under Treasury
regulations, and subject to certain transition rules, a stock option will, in
general, qualify as "performance based" compensation if it (i) has an exercise
price of not less than the fair market value of the underlying stock on the date
of grant, (ii) is granted under a plan that limits the number of shares for
which options may be granted to an employee during a specified period, which
plan is approved by a majority of the shareholders entitled to vote thereon, and
(iii) is granted by a compensation committee consisting solely of at least two
independent directors. The terms of the 1996 Plan and the composition of the
Committee are intended to comply with these regulations relating to stock
options. If a stock option to an executive referred to above is not "performance
based", the amount that would otherwise be deductible by the Company in respect
of such stock option will be disallowed to the extent that the executive's
aggregate non-performance based compensation paid in the relevant year exceeds
$1.0 million.
Reasons for Shareholder Approval
There are three reasons for seeking shareholder approval of the
proposed 1996 Plan. One is to satisfy a NASD bylaw that requires companies whose
shares are reported on the Nasdaq National Market to obtain shareholder approval
of stock plans for directors, officers or key employees. The second reason is to
satisfy requirements of the Code which require shareholder approval of the 1996
Plan to permit options granted to qualify as incentive stock options to the
extent so designated and to permit the 1996 Plan to meet the requirements of
Section 162(m) of the Code applicable to performance-based compensation. The
final reason is to satisfy the requirements of Rule 16b-3 under the Exchange
Act, which include shareholder approval. If the requirements of Rule 16b-3 are
satisfied, then neither the grant of an option under the 1996 Plan, nor, subject
to certain conditions, the transfer of shares to pay an option price under the
1996 Plan, will trigger the provisions of Section 16(b) of the Exchange Act
regarding "short-swing" profits.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE 1996 PLAN.
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<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1997 Annual Meeting of Shareholders must
be submitted to the Company by November 26, 1996 to receive consideration for
inclusion in the Company's Proxy Statement.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant for the fiscal year ended
December 31, 1995, and for the current fiscal year is the firm of Grant Thornton
LLP, Philadelphia, Pennsylvania.
A representative of Grant Thornton LLP is expected to be present at the
Meeting and to be available to respond to appropriate questions. The
representative will have the opportunity to make a statement if he so desires.
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-KSB
This Proxy Statement is accompanied by the Company's Annual Report to
Shareholders for the year ended December 31, 1995.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1995 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO
THE REPORT, BY SENDING A WRITTEN REQUEST THEREFOR TO FIRST COLONIAL GROUP, INC.,
76 SOUTH MAIN STREET, NAZARETH, PENNSYLVANIA 18064, ATTENTION: REID L. HEEREN,
VICE PRESIDENT.
By Order of the Board of Directors
S. ERIC BEATTIE
President and Chief
Executive Officer
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<PAGE>
EXHIBIT A
FIRST COLONIAL GROUP, INC.
1996 EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of the 1996 Employee Stock Option Plan (the
"Plan") is to provide additional incentive to officers and other key employees
of First Colonial Group, Inc. (the "Company") and each present or future parent
or subsidiary corporation by encouraging them to invest in shares of the
Company's common stock, $5.00 par value ("Common Stock"), and thereby acquire a
proprietary interest in the Company and an increased personal interest in the
Company's continued success and progress, to the mutual benefit of officers,
employees and shareholders.
2. Aggregate Number of Shares
250,000 shares of the Company's Common Stock shall be the
aggregate number of shares which may be issued under this Plan. Notwithstanding
the foregoing, in the event of any change in the outstanding shares of the
Common Stock of the Company by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Compensation Committee (defined
in Section 4(a)), deems in its sole discretion to be similar circumstances, the
aggregate number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Compensation Committee. Reacquired shares of the Company's Common Stock, as well
as unissued shares, may be used for the purpose of this Plan. Common Stock of
the Company subject to options which have terminated unexercised, either in
whole or in part, shall be available for future options granted under this Plan.
3. Class of Persons Eligible to Receive Options; Limitations
All officers and key employees of the Company and of any
present or future parent or subsidiary corporation of the Company are eligible
to receive an option or options under this Plan. The individuals who shall, in
fact, receive an option or options shall be selected by the Compensation
Committee, in its sole discretion, except as otherwise specified in Section 4
hereof. During the term of this Plan, no optionee under this Plan shall be
entitled to be granted options to purchase shares of the Company's Common Stock
in excess of the total number of shares set forth in Section 2 of this Plan (as
adjusted pursuant to Section 2).
4. Administration of Plan
(a) This Plan shall be administered by the Compensation
Committee ("Committee") appointed by the Company's Board of Directors. The
Committee shall consist of a minimum of two and a maximum of seven members of
the Board of Directors, each of whom shall be a "disinterested person" within
the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as
amended, or any future corresponding rule. The Committee shall, in addition to
its other authority and subject to the provisions of this Plan, determine which
individuals shall in fact be granted an option or options, whether the option
shall be an Incentive Stock Option or a Non-Qualified Stock Option (as such
terms are defined in Section 5(a)), the number of shares to be subject to each
of the options, the time or times at which the options shall be granted, the
rate of
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option exercisability, and, subject to Section 5 hereof, the price at which each
of the options is exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of
its business and administration of this Plan as it considers desirable. A
majority of the members of the Committee shall constitute a quorum for all
purposes. The vote or written consent of a majority of the members of the
Committee on a particular matter shall constitute the act of the Committee on
such matter. The Committee shall have the right to construe the Plan and the
options issued pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of an authority or discretion granted
in connection with the Plan to a Committee or the Board of Directors, or for the
acts or omissions of any other members of a Committee or the Board of Directors.
Subject to the numerical limitations on Committee membership set forth in
Section 4(a) hereof, the Board of Directors may at any time appoint additional
members of the Committee and may at any time remove any member of the Committee
with or without cause. Vacancies in the Committee, however caused, may be filled
by the Board of Directors, if it so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either
Incentive Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified
Stock Options granted pursuant to Section 5(c) hereof, as determined by the
Committee. An "Incentive Stock Option" is an option which satisfies all of the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations thereunder, and a "Non-Qualified Stock Option"
is an option which either does not satisfy all of those requirements or the
terms of the option provide that it will not be treated as an Incentive Stock
Option. The Committee may grant both an Incentive Stock Option and a
Non-Qualified Stock Option to the same person, or more than one of each type of
option to the same person. The option price for Incentive Stock Options issued
under this Plan shall be equal at least to the fair market value (as defined
below) of the Company's Common Stock on the date of the grant of the option. The
option price for Non-Qualified Stock Options issued under this Plan may, in the
sole discretion of the Compensation Committee, be less than the fair market
value of the Company's Common Stock on the date of the grant of the option. The
fair market value of the Company's Common Stock on any particular date shall
mean the last reported sale price of a share of the Company's Common Stock on
any stock exchange on which such stock is then listed or admitted to trading, or
on the NASDAQ National Market System or Small Cap NASDAQ, on such date, or if no
sale took place on such day, the last such date on which a sale took place, or
if the Common Stock is not then quoted on the NASDAQ National Market System or
Small Cap NASDAQ, or listed or admitted to trading on any stock exchange, the
average of the bid and asked prices in the over-the-counter market on such date,
or if none of the foregoing, a price determined by the Committee.
(b) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Incentive Stock Options issued pursuant to this Plan shall
be issued substantially in the form set forth in Appendix I hereof, which form
is hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive Stock
Options shall not be exercisable after the expiration of ten years from the date
such options are granted, unless terminated earlier under the terms of the
option. At the time of the grant of an Incentive Stock Option hereunder, the
Committee may, in its discretion, amend or supplement any of the option terms
contained in Appendix I for any particular optionee, provided that the option as
amended or
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supplemented satisfies the requirements of Section 422 of the Code and the
regulations thereunder. Each of the options granted pursuant to this Section
5(b) is intended, if possible, to be an "Incentive Stock Option" as that term is
defined in Section 422 of the Code and the regulations thereunder. In the event
this Plan or any option granted pursuant to this Section 5(b) is in any way
inconsistent with the applicable legal requirements of the Code or the
regulations thereunder for an Incentive Stock Option, this Plan and such option
shall be deemed automatically amended as of the date hereof to conform to such
legal requirements, if such conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Non-Qualified Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix II hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Non-Qualified
Stock Options shall expire ten years and 30 days after the date they are
granted, unless terminated earlier under the option terms. At the time of
granting a Non-Qualified Stock Option hereunder, the Committee may, in its
discretion, amend or supplement any of the option terms contained in Appendix II
for any particular optionee.
(d) Neither the Company nor any of its current or future
parent, subsidiaries or affiliates, nor their officers, directors, shareholders,
stock option plan committees, employees or agents shall have any liability to
any optionee in the event (i) an option granted pursuant to Section 5(b) hereof
does not qualify as an "Incentive Stock Option" as that term is used in Section
422 of the Code and the regulations thereunder; (ii) any optionee does not
obtain the tax treatment pertaining to an Incentive Stock Option; or (iii) any
option granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Amendment, Supplement, Suspension and Termination
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of
Directors of the Company. The Board of Directors reserves the right at any time,
and from time to time, to amend or supplement this Plan in any way, or to
suspend or terminate it, effective as of such date, which date may be either
before or after the taking of such action, as may be specified by the Board of
Directors; provided, however, that such action shall not affect options granted
under the Plan prior to the actual date on which such action occurred. If a
amendment or supplement of this Plan is required by the Code or the regulations
thereunder to be approved by the shareholders of the Company in order to permit
the granting of "Incentive Stock Options" (as that term is defined in Section
422 of the Code and regulations thereunder) pursuant to the amended or
supplemented Plan, such amendment or supplement shall also be approved by the
shareholders of the Company in such manner as is prescribed by the Code and the
regulations thereunder. If the Board of Directors voluntarily submits a proposed
amendment, supplement, suspension or termination for shareholder approval, such
submission shall not require any future amendments, supplements, suspensions or
terminations (whether or not relating to the same provision or subject matter)
to be similarly submitted for shareholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption
by the Company's Board of Directors, subject however to approval by the holders
of the Company's Common Stock in the manner as prescribed in the Code and the
regulations thereunder. Options may be granted under this Plan prior to
obtaining shareholder approval, provided such options shall not be exercisable
until shareholder approval is obtained.
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8. General Conditions
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any employee the right to continue in
the employ of the Company or any affiliated or subsidiary corporation or
interfere in any way with the rights of the Company or any affiliated or
subsidiary corporation to terminate his employment in any way.
(b) Corporate action constituting an offer of stock for sale
to any employee under the terms of the options to be granted hereunder shall be
deemed complete as of the date when the Committee authorizes the grant of the
option to the employee, regardless of when the option is actually delivered to
the employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary
corporation" as used throughout this Plan, and the options granted pursuant to
this Plan, shall (except as otherwise provided in the option form) have the
meaning that is ascribed to that term when contained in Section 422(b) of the
Code and the regulations thereunder, and the Company shall be deemed to be the
grantor corporation for purposes of applying such meaning.
(d) References in this Plan to the Code shall be deemed to
also refer to the corresponding provisions of any future United States revenue
law.
(e) The use of the masculine pronoun shall include the
feminine gender whenever appropriate.
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APPENDIX I
INCENTIVE STOCK OPTION
To: __________________________________________________________________________
Name
__________________________________________________________________________
Address
Date of Grant: ________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase __________ shares of common stock, $5.00 par value ("Common Stock"), of
First Colonial Group, Inc. (the "Company") at a price of $ per share pursuant to
the Company's 1996 Employee Stock Option Plan (the "Plan").
Your option may first be exercised on and after one year from the date
of grant, but not before that time. On and after one year and prior to two years
from the date of grant, your option may be exercised for up to 25% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Each
succeeding year thereafter, your option may be exercised for up to an additional
25% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Thus, this
option is fully exercisable on and after four years after the date of grant,
except if terminated earlier as provided herein. No fractional shares shall be
issued or delivered. This option shall terminate and is not exercisable after
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereafter provided.
In the event of a "change of control" (as hereafter defined) of the
Company, your option may, from and after the date of the change of control, and
notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the members
of the board of directors of the Company;
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2. A change within a twelve-month period in the holders of more than
50% of the outstanding voting stock of the Company; or
3. Any other event deemed to constitute a "change of control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary
of the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check, and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Compensation Committee) certificates representing
shares of Common Stock of the Company, which will be valued by the Secretary of
the Company at the fair market value per share of the Company's Common Stock (as
determined in accordance with the Plan) on the date of delivery of such
certificates to the Company, accompanied by an assignment of the stock to the
Company; or (c) (unless prohibited by the Compensation Committee) any
combination of cash and Common Stock of the Company valued as provided in clause
(b). Any assignment of stock shall be in a form and substance satisfactory to
the Secretary of the Company, including guarantees of signature(s) and payment
of all transfer taxes if the Secretary deems such guarantees necessary or
desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the Company or
a Company subsidiary corporation is terminated (whether such termination be
voluntary or involuntary) other than by reason of retirement at age 65 (or such
earlier retirement age as the Compensation Committee may approve), disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder, or death, in which case your
option will terminate one year from the date of termination of employment due to
retirement, disability or death (but in no event later than the Scheduled
Termination Date). After the date your employment is terminated, as aforesaid,
you may exercise this option only for the number of shares which you had a right
to purchase and did not purchase on the date your employment terminated. If you
are employed by a Company subsidiary corporation, your employment shall be
deemed to have terminated on the date your employer ceases to be a Company
subsidiary corporation, unless you are on that date transferred to the Company
or another the Company subsidiary corporation. Your employment shall not be
deemed to have terminated if you are transferred from the Company to a Company
subsidiary corporation, or vice versa, or from one the Company subsidiary
corporation to another the Company subsidiary corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your executor or administrator, as the case may be, may, at any
time within one year after the date of your death (but in no event later than
the Scheduled Termination Date), exercise the option as to any shares which you
had a right to purchase and did not purchase during your lifetime. If your
employment with the Company or a Company parent or subsidiary corporation is
terminated by reason of your becoming disabled (within the meaning of Section
22(e)(3) of the Code and the regulations thereunder), you or your legal guardian
or custodian may at any time within one year after the date of such termination
(but in no event later than the Scheduled Termination Date), exercise the option
as to any shares which you had a right to purchase and did not purchase prior to
such termination. Your executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger,
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consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar circumstances,
the number and kind of shares subject to this option and the option price of
such shares shall be appropriately adjusted in a manner to be determined in the
sole discretion of the Compensation Committee.
This option is not transferable otherwise than by Will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted
is approved by the shareholders of the Company in the manner prescribed by the
Code and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as the Company may deem necessary or
desirable;
(c) During any period of time in which the Company deems that
the exercisability of this option, the offer to sell the shares optioned
hereunder, or the sale thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may cause the Company to be
legally obligated to issue or sell more shares than the Company is legally
entitled to issue or sell; or
(d) Until you have paid or made suitable arrangements to pay
(i) all federal, state and local income tax withholding required to be withheld
by the Company in connection with the option exercise and (ii) the employee's
portion of other federal, state and local payroll and other taxes due in
connection with the option exercise.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law.
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(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of the Company and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
Nothing herein shall modify your status as an at-will employee of the
Company. Further, nothing herein guarantees you employment for any specified
period of time. This means that either you or the Company may terminate your
employment at any time for any reason, or no reason. You recognize that, for
instance, you may terminate your employment or the Company may terminate your
employment prior to the date on which your option becomes vested.
Any dispute or disagreement between you and the Company with respect to
any portion of this option or its validity, construction, meaning, performance
or your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration. At any time prior to a decision from the arbitrator(s)
being rendered, you and the Company may resolve the dispute by settlement. You
and the Company shall equally share the costs charged by the American
Arbitration Association or its successor, but you and the Company shall
otherwise be solely responsible for your own respective counsel fees and
expenses. The decision of the arbitrator(s) shall be made in writing, setting
forth the award, the reasons for the decision and award and shall be binding and
conclusive on you and the Company. Further, neither you nor the Company shall
appeal any such award. Judgment of a court of competent jurisdiction may be
entered upon the award and may be enforced as such in accordance with the
provisions of the award.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date
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of this option, the terms of the Plan shall govern. This option constitutes the
entire understanding between the Company and you with respect to the subject
matter hereof and no amendment, supplement or waiver of this option, in whole or
in part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
FIRST COLONIAL GROUP, INC.
By: ____________________________
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
------------------------ -------------
(Signature) (Date)
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APPENDIX II
NON-QUALIFIED STOCK OPTION
To: _________________________________________________________________________
Name
__________________________________________________________________________
Address
Date of Grant: _____________________________
You are hereby granted an option, effective as of the date hereof, to
purchase _________ shares of common stock, $5.00 par value ("Common Stock"), of
First Colonial Group, Inc. (the "Company") at a price of $____ per share
pursuant to the Company's 1996 Employee Stock Option Plan (the "Plan").
Your option may first be exercised on and after one year from the date
of grant, but not before that time. On and after one year and prior to two years
from the date of grant, your option may be exercised for up to 25% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Each
succeeding year thereafter, your option may be exercised for up to an additional
25% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason of
a stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Committee deems in its sole discretion to be similar circumstances). Thus, this
option is fully exercisable on and after four years after the date of grant,
except if terminated earlier as provided herein. No fractional shares shall be
issued or delivered. This option shall terminate and is not exercisable after
ten years from the date of its grant (the "Scheduled Termination Date"), except
if terminated earlier as hereafter provided.
In the event of a "change of control" (as hereafter defined) of the
Company, your option may, from and after the date of the change of control, and
notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the members
of the board of directors of the Company;
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2. A change within a twelve-month period in the holders of more than
50% of the outstanding voting stock of the Company; or
3. Any other event deemed to constitute a "change of control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary
of the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check, and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Compensation Committee) certificates representing
shares of Common Stock of the Company, which will be valued by the Secretary of
the Company at the fair market value per share of the Company's Common Stock (as
determined in accordance with the Plan) on the date of delivery of such
certificates to the Company, accompanied by an assignment of the stock to the
Company; or (c) (unless prohibited by the Compensation Committee) any
combination of cash and Common Stock of the Company valued as provided in clause
(b). Any assignment of stock shall be in a form and substance satisfactory to
the Secretary of the Company, including guarantees of signature(s) and payment
of all transfer taxes if the Secretary deems such guarantees necessary or
desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the Company or
a Company subsidiary corporation is terminated (whether such termination be
voluntary or involuntary) other than by reason of retirement at age 65 (or such
earlier retirement age as the Compensation Committee may approve), disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder, or death, in which case your
option will terminate one year from the date of termination of employment due to
retirement, disability or death (but in no event later than the Scheduled
Termination Date). After the date your employment is terminated, as aforesaid,
you may exercise this option only for the number of shares which you had a right
to purchase and did not purchase on the date your employment terminated. If you
are employed by a Company subsidiary corporation, your employment shall be
deemed to have terminated on the date your employer ceases to be a Company
subsidiary corporation, unless you are on that date transferred to the Company
or another Company subsidiary corporation. Your employment shall not be deemed
to have terminated if you are transferred from the Company to a Company
subsidiary corporation, or vice versa, or from one Company subsidiary
corporation to another Company subsidiary corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your executor or administrator, as the case may be, may, at any
time within one year after the date of your death (but in no event later than
the Scheduled Termination Date), exercise the option as to any shares which you
had a right to purchase and did not purchase during your lifetime. If your
employment with the Company or a Company parent or subsidiary corporation is
terminated by reason of your becoming disabled (within the meaning of Section
22(e)(3) of the Code and the regulations thereunder), you or your legal guardian
or custodian may at any time within one year after the date of such termination
(but in no event later than the Scheduled Termination Date), exercise the option
as to any shares which you had a right to purchase and did not purchase prior to
such termination. Your executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee
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deems in its sole discretion to be similar circumstances, the number and kind of
shares subject to this option and the option price of such shares shall be
appropriately adjusted in a manner to be determined in the sole discretion of
the Compensation Committee.
This option is not transferable otherwise than by Will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted
is approved by the shareholders of the Company in the manner prescribed by the
Code and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as the Company may deem necessary or
desirable; or
(c) During any period of time in which the Company deems that
the exercisability of this option, the offer to sell the shares optioned
hereunder, or the sale thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may cause the Company to be
legally obligated to issue or sell more shares than the Company is legally
entitled to issue or sell; or
(d) Until you have paid or made suitable arrangements to pay
(i) all federal, state and local income tax withholding required to be withheld
by the Company in connection with the option exercise and (ii) the employee's
portion of other federal, state and local payroll and other taxes due in
connection with the option exercise.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
the Company may, in its sole discretion, deem advisable to avoid any violation
of federal, state, local or securities exchange rule, regulation or law.
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(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of the Company and you that this option shall not
be an "Incentive Stock Option" as that term is used in Section 422 of the Code
and the regulations thereunder.
Nothing herein shall modify your status as an at-will employee of the
Company. Further, nothing herein guarantees you employment for any specified
period of time. This means that either you or the Company may terminate your
employment at any time for any reason, or no reason. You recognize that, for
instance, you may terminate your employment or the Company may terminate your
employment prior to the date on which your option becomes vested.
Any dispute or disagreement between you and the Company with respect to
any portion of this option or its validity, construction, meaning, performance
or your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration. At any time prior to a decision from the arbitrator(s)
being rendered, you and the Company may resolve the dispute by settlement. You
and the Company shall equally share the costs charged by the American
Arbitration Association or its successor, but you and the Company shall
otherwise be solely responsible for your own respective counsel fees and
expenses. The decision of the arbitrator(s) shall be made in writing, setting
forth the award, the reasons for the decision and award and shall be binding and
conclusive on you and the Company. Further, neither you nor the Company shall
appeal any such award. Judgment of a court of competent jurisdiction may be
entered upon the award and may be enforced as such in accordance with the
provisions of the award.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, supplement or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the
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parties hereunder shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
FIRST COLONIAL GROUP, INC.
By: ________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and, having
read it hereby signify my understanding of, and my agreement with, its terms and
conditions.
_______________________ _______________
(Signature) (Date)
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